Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Spencer Strasmore engages in the following transactions in 2020: Receives wages paid in cash of $50,000 In addition to his wages, his employer paid health

Spencer Strasmore engages in the following transactions in 2020:

  • Receives wages paid in cash of $50,000
  • In addition to his wages, his employer paid health insurance premiums on his behalf totaling $15,000
  • His employer also contributed $10,000 to a 401(k) on his behalf. He also elected to have $10,000 of his wages contributed to the 401(k) (these wages are not included in the $50,000 listed above).
  • Spencer received a statement from his 401(k) account stating there was a $2,000 capital gain in the current year that resulted from the sale of a mutual fund held in the 401(k) account. He did not receive any distributions from the account.
  • Spencer also has a side business that does consulting. In the current year he provided consulting services for a friend and since his friend was low on cash they agreed that the friend would pay him by painting his house. The FMV of the painting is $8,000.
  • Receives municipal bond interest from the city of West Lafayette bonds of $5,000
  • Spencer owns stock in Microsoft and the value of the stock increased from $4,000 to $6,000 during 2020. He did not sell any of the stock.
  • He received a gift from his grandma of $10,000.
  • Spencer owns a 20% interest in a LLC (taxed as a partnership). He received a Schedule K-1 from the partnership indicating that his share of the LLC income was $8,000 of ordinary income and $2,000 of 0/15/20 long-term capital gain income.
  • He purchased 100 shares HP stock in 2012 for $2,000 and sold the stock for $1,000 on June 12, 2020. He also purchased 200 shares of HP on June 15, 2020 for $1,200.
  • In June 2020, he received a refund of $900 of state income taxes he paid last year. He had itemized deductions of $13,590 in 2019 (assume the standard deduction was $12,200) including state income taxes paid of $1,750.
  • He sold Disney stock for $10,000 on April 15, 2020 that he originally purchased on February 13, 2015 for $16,000.

Calculate Spencers gross income for 2020.

Item

Amount included in Gross Income

Wages

Health insurance premiums

401(k) contributions

Gain in 401(k)

Consulting

Muni Bond

Microsoft stock

Gift

LLC

State tax refund

Net capital gain (loss) (show calculation below)

Gross Income

Net capital gain (loss):

Other Calculations:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Basic Food And Beverage Cost Control

Authors: Jack E. Miller, David K. Hayes

1st Edition

0471579181, 978-0471579182

More Books

Students also viewed these Accounting questions

Question

describe and present a summary of data you have collected.

Answered: 1 week ago

Question

collect, organise and store quantitative data in an effective way;

Answered: 1 week ago