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TAX PROBLEM #4, FALL 2013 PART 1. John and Sar...




TAX PROBLEM #4, FALL 2013 PART 1. John and Sarah Smyth are married and wish to file a joint return for 2013. They have one dependent child, Jack (age 14), who lives with them. Their primary residence is in Phoenix, and they own a condo (2nd home) in Flagstaff. John and Sarah have the following items of income and expense for 2013: Income: John?s salary $135,000 Sarah?s salary 100,000 Interest income on City of Mesa bonds 2,000 Interest income on US Treasury bonds 10,000 Qualified cash dividends 10,000 Regular (nonqualified) cash dividends 1,000 FMV of 50 shares of AB Co. common stock received as a stock dividend 12,500 Refund of 2012 Arizona income tax (the Smyths itemized in 2012) 4,000 Net rental income from 100% owned rental house 8,000 Share of Brown Partnership loss* (10,000) Share of Purple S Corporation income** 60,000 Life insurance proceeds received on the death of John?s father 100,000 Short-term capital gains 12,000 Short-term capital losses (16,000) 28% Long-term capital gains 10,000 15% Long-term capital gains 40,000 15% Long-term capital losses (5,000) Expenses: Home mortgage interest ($500,000 principal) 30,000 Home equity loan interest ($110,000 principal) 7,700 Condo loan interest ($150,000 principal) 12,000 Car loan interest 7,000 Credit card finance charges 3,000 Home property taxes 15,000 Condo property taxes 4,000 Condo maintenance fees 3,000 Car tags (ad valorem part) 2,500 Arizona income tax withheld 16,000 Arizona sales tax paid 8,000 Federal income taxes withheld 50,000 Medical insurance premiums (not part of an employer plan) 10,000 Unreimbursed medical bills 6,000 Charitable contributions 12,000 Unreimbursed employee business expenses 8,000 * John and Sarah invested $6,000 as limited partners in the Brown Partnership at the beginning of 2013. The loss is not the result of real estate rentals. Neither materially participate in the operations of the partnership.. ** Sarah is a 50% owner and President of Purple. REQUIRED: Determine John and Sarah?s tax liability, using the tax formula. You must label your work, provide supporting schedules for summary computations, and indicate any carryovers. Present your work in a neat, orderly fashion. PART 2. Jack owns a mutual fund, which paid $2,500 in regular (nonqualified) dividends in 2013. Jack also earned $700 from mowing lawns during the year. REQUIRED: Determine Jack? tax liability, using the tax formula. Label all work.


Paper#3653 | Written in 18-Jul-2015

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