Question
our cousin Albus Dumbledore, who is 30 years old, single and a restaurant manager, heard that you have enrolled in the Masters-of-Taxation program at State
our cousin Albus Dumbledore, who is 30 years old, single and a restaurant manager, heard that you have enrolled in the Masters-of-Taxation program at State University. He has asked you for help in preparing her 2019 tax return and provides you with the following information: Salary $50,000 Alimony received (Pre-2019 agreement) 3,600 Interest on GMAC Bonds 800 Interest on city of New Orleans bonds 1,300 Interest on a bank savings account 600 Berlinco, Inc. (a foreign corporation) (nonqualified dividend) 100 Long-term capital loss (2,000) Long-term capital gain 1,000 Short-term capital gain 5,000 Short-term capital loss (3,000) Short-term capital loss carryover from 2018 (5,000) Cash award from local United Way [1] 300 Christmas turkey [2] 30 Parking at office [2] 500 Membership in professional organizations [2] 100 Group term life insurance ($40,000 policy) [2] 135 Unreimbursed medical expenses: Medical insurance premiums $1,900 Prescription drugs 250 Dentist 2,250 Emergency room fee 885 Cold pills, aspirin, other over-the-counter medicine 120 Rental fee for crutches 80 Real estate taxes $1,600 State income tax withheld 2,150 State income tax paid in 2019 for 2018 tax return 150 Home mortgage interest 4,800 Home equity interest [3] 500 Charitable contributions cash 1,950 Charitable contributions clothes [4] Tax preparation fee for 2018 return, paid in 2019 300 Unreimbursed business expenses [5] 888 Note: [1] Albus kept the award from the United Way. [2] Benefits paid by the employer [3] Albus borrowed $12,000 and used the proceeds to purchase a new car. [4] The original cost of the clothes was $480 and the current FMV is $200. [5] Of the $888 in expenses, $180 are for meals and entertainment. Compute Albuss: adjusted gross income, taxable income, and tax liability.
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