Part I In 1999, Vivian and Hoang met at Truman became madly in love as they were concerned about the end of the world on 12-31-1999. In January, 2000, they were married.

Their 2019 W-2s are summarized below.

Item	Vivian	Hoang
Salary	$60,000	$40,000
Federal withholding	$10,000	$2,500
State withholding	$4,000	$1,000
Social Security tax	$4,590	$3,060
Medicare tax	$870	$580

Hoang is involved in two partnerships (ABC and DEF); neither of which he is active in. At the start of 2019, he had a basis in ABC of $50,000 and in DEF of $8,000. During 2019 his share of the ABC profit was $10,000 and his share of the DEF loss was $15,000. Neither one of the activities is subject to the SE tax.

They fully support their twin daughters; Alice and Angel (aged 18). They also support a good friend, Michael Barnes (aged 79), who lives with them and is fully supported by them. His only income was social security benefits of $6,000.

Alice is a star student at Harvard (the Truman of the northeast) with a major in Asian History. She had an annual scholarship of $50,000; her tuition and books were $40,000.

In 2019, Angel, who is a college drop-out, owned a business selling illegal drugs. She had sales of $100,000; cost-of-goods-sold of $70,000 and expenses of $10,000.

An examination of Hoang and Vivians bank account reveals the following expenses.

Payments on their home mortgage-

Interest $8,000

Principal $2,000

Property taxes $2,500

Sales taxes $1,500

Charitable contribution to the Trinity

Episcopal Church $3,000

Political contribution to Donald Trump $1,500

Drug rehab costs for Angel $28,000

Health insurance for the entire family $15,000

Required Be sure to show and clearly label all of your work: (5 points each)

1. What is Hoangs ending basis in ABC? In DEF?

2. Determine the couples AGI (dont forgive to include the appropriate amounts form the partnerships.

3. Determine the couples itemized deductions.

4. Who can the couple claim as a dependent for purposes of the dependent care credit?

5. What is the couples taxable income?

6. What is the tax refund (or due tax due) for the couple?

7. What is the total tax liability for Alice?

8. What is the total tax liability for Angel (dont forget the SE tax)?

9. What is the total tax liability for Michael?

Part II Explain why the tax cut that was passed in 2017 is set to expire in 2016. Hint: It has to do with the Congressional Budget Office. (5 points)

Part III - Michael Barnes works as an audit manager for one of the big four accounting firms (making $100,000 per year). Because he passionately believes in their work, he also provides his services as an accountant to Habitat for Humanity (a qualified charity). They pay him $4,000 which he in turn donates back to the charity. Being an auditor, he believes that he will break-even from a tax standpoint (i.e. his tax liability will be unchanged). Explain why he is incorrect. Be specific. What would you advise instead? Be specific. (10 points)