Question from FCC Federal Taxation: Comprehensive Topics (2018)

Tax Return Problem

Bert and Barbara Longfelt support in nursing homes both Bert's parents and Barbara's parents. Bert's parents are 70 and 68 years respectively, and have no income except for the $3,600 in Social Security they recieve annually. Barbara's parents, both 72 years old, have the following sources of income.

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Social Security: $9,800

Interest Income: $2,600

Divident Income: $900

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Bert's annual salary is $45,000 and his wife's annual salary is $55,000.

They have two small children who live at home. Also, they own an aprtment house from which they derive $6,000 net rental income. Two item from their rental property confuse them, so they did not include them in their rental income.

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Security deposits recieved and to be used against final month's rent: $500

Two tenants paid rent in advance in December 2017; The rent was due January 1, 2018: $600

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Barbara Owned stock prior to her marriage to Bert and received the following cash dividends:

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General Corp. nonqualified common stock dividend (U.S corporation): $300

Live forever LIfe Insurance Co. (divident on live insurance policy: $100

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Bert and Barbara have several sources of interest income:

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Interest Income from savings accounts: $850

Interest income from State of Tennessee Highway Bonds: $400

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Barbara entered the local area bake-off, won first place, and received a $1,000 cash prize.

Bert, who is an accountant, made an arrangment with Harold the dentist. Bert would do Harold's tax work if Harold would take care of Bert and his family's dental work. During the year, Bert estimated that the value of his services to Harold was $900 and that Harold gave Bert and his family $1,800 worth of dental services.

In December, Bert did a consulting assignment on a weekend and received $700. No Social Security or taxes were withhehld.

During the year, they had $15,000 withheld for federal taxes.

During 2017, Bert and Barbara have $14,000 of itemized deductions.

Compute Bert and Barbara's net tax due, including self-employment tax. Assume dividends are taxed at ordinary rates.