Question
Valerie and Eddie Van Halen were married on March 14 of 2019. Valerie has a seven-year-old daughter, Sally Roth, from her previous marriage who lived
Valerie and Eddie Van Halen were married on March 14 of 2019. Valerie has a seven-year-old daughter, Sally Roth, from her previous marriage who lived with the Van Halens for the entire year. Eddie works as a promoter for Records Inc. earning a salary of $78,950. On his W-2 it shows $11,000 as having been withheld for federal income taxes, and the correct social security and medicare taxes were withheld (so you don't need to calculate them as they don't show up on a 1040). Valerie is self-employed and runs a day-care center. The Van Halens reported the following financial information pertaining to their activities during 2022. Make up their SSNs and address.
a. Eddie borrowed $12,000 from his employer to purchase a car. His employer charged him $100 interest on the loan, which he paid on December 31, but would have charged him $750 if interest was calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan.
b. Valerie received $2,600 in alimony and $5,580 in child support payments from her former husband who she divorced in 2017.
c. Eddie won an $800 cash prize from playing Keno at Oaktree.
d. The Van Halens received $520 of interest from corporate bonds and $275 of interest from a municipal bond. Valerie owned these bonds before she married Eddie.
e. The couple bought 50 shares of Apple stock for $340 per share on July 2. The stock was worth $407 a share on December 31. The stock paid a qualified dividend of $8 per share on December 1.
f. Valeries father passed away on April 14. She inherited cash of $150,000 and his baseball card collection, valued at $20,000. As the beneficiary of her fathers life insurance policy, Valerie also received $250,000.
g. The couple spent a weekend in Atlantic City in November and came home with gambling winnings of $1,250.
h. Eddie received $450 cash for reaching 10 years of continuous service at Records Inc.
i. Eddie was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $5,000 from his disability insurance. Eddie paid $70 a month for the premiums on the disability insurance policy.
j. The drunk driver who hit Eddie in part (i) was required to pay his $2,000 medical costs, $1,500 for the emotional trauma he suffered from the accident, and $14,850 for punitive damages.
k. For meeting his performance goals this year, Eddie was informed on December 27 that he would receive a $6,000 year-end bonus. Records Inc. mailed Eddies bonus check from its payroll processing center on December 28th. Eddie didnt receive the check at his home until January 2. The amount is not included on his W-2 or in the $78,950 listed above. Direct deposit was not possible.
l. Valerie is a 10 percent owner of DustOff, a Subchapter S corporation. The company reported total ordinary business income for the year of $92,000. Valerie acquired the stock in 2014.
m. Valeries daycare business collected $35,000 in revenues. In addition, customers owed her $3,000 at year-end. During the year, Valerie spent $5,500 for supplies, $1,500 for utilities, and $15,000 for rent. One customer gave her use of his vacation home for a week (worth $2,500) in exchange for Valerie allowing his child to attend the day-care center free of charge. Valerie accounts for her business activities using the cash method of accounting. Don't worry about self-employment taxes. The software will automatically calculate the SE taxes, and that is fine.
n. Eddies employer pays the couples annual health insurance premiums of $5,950 for a qualified plan.
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