Question
PART 1. Jim and Ginger are married and wish to file a joint return for 2018. They have one dependent child, Hannah (age 15), who
PART 1. Jim and Ginger are married and wish to file a joint return for 2018. They have one dependent child, Hannah (age 15), who lives with them. Jim and Ginger have the following items of income and expense for 2018:
Income: |
|
Jims salary | $120,000 |
Gingers salary | 125,000 |
Interest income on State of Arizona bonds | 3,000 |
Interest income on US Treasury bonds | 6,000 |
Qualified cash dividends | 8,000 |
Regular (nonqualified) cash dividends | 8,500 |
FMV of shares received from stock dividend | 9,500 |
Share of Hollywood Partnership loss* | (12,000) |
Share of Gonzaga Corporation (an electing S corporation) income** | 30,000 |
Life insurance proceeds received on the death of Jims mother | 100,000 |
Short-term capital gains | 6,000 |
Short-term capital losses | (10,000) |
25% Long-term capital gains | 18,000 |
15% Long-term capital gains | 30,000 |
15% Long-term capital losses | (5,000) |
|
|
Expenses: |
|
Traditional IRA Contributions | 11,000 |
Home mortgage interest ($300,000 principal) | 18,000 |
Home equity loan interest ($75,000 principal) | 6,000 |
Vacation home loan interest ($120,000 principal) | 9,600 |
Car loan interest | 3,000 |
Home property taxes | 6,000 |
Vacation home property taxes | 1,800 |
Car tags (ad valorem part) | 950 |
Arizona income tax withheld | 12,000 |
Federal income taxes withheld | 48,000 |
Arizona sales taxes paid | 9,500 |
Medical insurance premiums (not part of an employer plan) | 12,000 |
Unreimbursed medical bills | 10,000 |
Charitable contributions | 13,500 |
* Jim and Ginger invested $15,000 as limited partners in the Hollywood Partnership at the beginning of 2018. The loss is not the result of real estate rentals. Neither Jim nor Ginger materially participate.
** Ginger is a 50% owner and President of Gonzaga. She materially participates in the corporation.
REQUIRED: Determine Jim and Gingers tax liability, using the tax formula. You must label your work, provide supporting schedules for summary computations, and indicate any carryovers. Present your work in a neat, orderly fashion.
PART 2. Jim and Ginger have purchased several bond mutual funds in Hannahs name. During 2018, the bonds earned $5,000 of taxable interest. Hannah also earned $1,800 from babysitting.
REQUIRED: Determine Hannah tax liability, using the tax formula. Label all work.
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