Please would answer question question 4 from the Task 2 Instructions and the Financial Data. Thank you for your assistance,

Individual Tax Task - Financial Information 1 Personal Data: Spouse A is one of the partners in Fan Company A. Spouse A is married and has a total of three children living in the household. o Spouse A and Spouse B have one 10-year-old child together. o They each have one child from a previous marriage. Spouse B's child is an 18-year-old college freshman living at home Spouse A's child is a high school junior. Spouse B's mother lives with the family. She receives a monthly $750 Social Security check. She contributes all but $90 of this check to the family each month. The spouses have calculated the rent, food and other family contribution to her support at $7000 per year. Earnings: Spouse A has a K-1 from the partnership. It shows Spouse A's partnership share of income is $142,000. Spouse A's cash withdrawals during the year were $83,500. Spouse A has a W-2 showing $2,000 in gross earnings from the city park district for a part-time soccer referee job. Spouse B has 20 years experience as a corporate officer and was hired and began work the first of February as a controller for an electronics firm. Spouse B's gross earnings are $8,000 per month. Investments: Spouse A invested in 1,000 shares of Company E stock before the couple married 11 years ago. Company E pays a quarterly dividend. Spouse B was not employed during January and tried day trading for the month. Spouse B bought and sold on a daily basis and experienced net losses of $5,000. The couple owns a $5,000 municipal bond that pays 9% interest in semi-annual payments. Adjustments to income: Spouse A pays $600 in alimony monthly. This continues until his former spouse remarries or is deceased. Page Individual Tax Task - Financial Information 2 Spouse B receives monthly child support of $200 for her child from her previous marriage until the child is 18. Adjustments to income (continued) Spouse A has health insurance through the partnership. Spouse B covers herself and the children through her employer's plan. Spouse A has a Keogh retirement plan into which he contributes 10% of his earnings, up to the maximum allowed. When Spouse B was hired for her current position, the couple decided to move closer to Spouse B's new job to reduce commute time. When Spouse B had her former job, she commuted three miles to her workplace. Spouse B's new position, however, is located 52 miles from their former home. Due to Spouse B's new job the couple sold their house for $430,000. (They purchased it 10 years ago for $100,000, and four years ago they added 400 square feet to the house at a cost of $34,000.) They purchased their current home for $550,000. Itemized deductions: During the year, the family incurred a medical emergency while Spouse B was between jobs. One of the children required emergency surgery, and the hospital and doctor bills were $45,000. Spouse B had exercised her COBRA option with the previous employer, which provided for a $4,000 deductible and then 70% coverage of the hospital and doctor charges. Spouse A and Spouse B gave $6,000 to charities during the year. Because of Spouse B's new employer's dress standards, Spouse B spent about $2,600 to buy business suits for the new position. Rental activities: The couple owns two rental houses, which are managed by a local realty company. The gross yearly rents are $23,000, and the total expenses, including depreciation, are $29,200. The couple sold another rental house during the year. They purchased it four years ago for $90,000 and sold it during this year for $134,000. Note: After you review the data, review the Federal 1040 form for hints on what items are included in calculating income, what items are used to calculate adjusted Page Individual Tax Task - Financial Information 3 gross income, and what items are tax credits. (Do not calculate the form, only use it as a guideline). Page 302.2.30108 (2006) Help on this Pagelink opens in new window Directions SUBDOMAIN 302.2 FEDERAL INCOME TAX Competency 302.2.3: Tax Treatments for Individual Returns The student determines tax treatments for individual income tax returns. Objectives: 302.2.301: Identify the most advantageous filing status for a given situation. 302.2.302: Differentiate between standard deductions, itemized deductions, and credits. 302.2.303: Identify revenue sources to be included and excluded from gross income for a given situation. 302.2.304: Differentiate between types of income that are taxable or not taxable. 302.2.305: Differentiate between the means by which shortterm and longterm capital gains and losses occur. 302.2.306: Calculate the gain or loss resulting from the disposition of property. 302.2.307: Show the effect of a pass through entity on an individual's income. 302.2.308: Explain the rules that apply to passive activity gains and losses. Given: Use the attached data (see the \"Given Financial Information\" attachment below) to help Spouse A file a personal federal income tax return. Note: There is insufficient numeric data supplied to complete the actual tax return The tax decisions will be made and explained in essay format as described in item A below. Task: A. Write an essay (suggested length of 2-5 pages) in which you recommend the most advantageous tax filing status for Spouse A and Spouse B on their federal tax return. In your essay: 1. Explain your recommendation based on current, applicable tax laws. 2. Explain the rules that apply to the following types of income on the couple's tax return. a. Taxable and nontaxable income b. Shortterm and longterm capital gains or losses c. Profit or losses from sale of property d. Partnership income and losses e. Gains or losses from passive activity 3. Explain your decision to include or exclude each of the types of income in part A2 based on current, applicable tax laws. a. For part A2e, explain the rules that apply to gains or losses from passive activity. 4. Calculate the adjustments to income that you would include on the return(s). a. Explain each adjustment item based on the applicable tax law. 5. Determine whether the couple should use the standard deduction or itemized deductions on their return(s). a. Explain your decision based on current, applicable tax laws. 6. Based on the given data, identify all tax credits available to the couple. a. Explain any credits based on the applicable tax law. B. When you use sources, include all intext citations and references in APA format. Note: For definitions of terms commonly used in the rubric, see the attached Rubric Terms. Note: When using sources to support ideas and elements in a paper or project, the submission MUST include APA formatted intext citations with a corresponding reference list for any direct quotes or paraphrasing. It is not necessary to list sources that were consulted if they have not been quoted or paraphrased in the text of the paper or project. Note: No more than a combined total of 30% of a submission can be directly quoted or closely paraphrased from sources, even if cited correctly. For tips on using APA style, please refer to the APA Handout web link included in the APA Guidelines