John supports Kevin, his cousin, who lived with him throughout 2019. John also supports three other individuals who do not live with him:Donna, who is John's motherMelissa, who John's stepsisterMorris, who is John's cousinAssume that Donna, Melissa, Morris, and Kevin each earn less than $4,200. How many dependents can John claim?1000034

For tax purposes, a dependent is someone “other than the taxpayer or spouse” who qualifies to be…

Answered: John supports Kevin, his cousin, who…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter8: Taxation Of Individuals

Section: Chapter Questions

Problem 70TA

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Margaret, age 65, and John, age 62, are married with a 23 -year-old daughter who lives in their home. They provide over half of their daughter's support, and their daughter earned $4,100 this year from a part-time job. Their daughter is not a full-time student. The daughter can/cannot be claimed as a dependent because: She cannot be claimed because she is over 19 and not a full-time student. She can be claimed because she is a qualifying child. She can be claimed because she is a qualifying relative. She cannot be claimed because she fails the gross income test.
Virginia and Richard are married taxpayers with adjusted gross income of $28,000 in 2019 If Virginia is able to make a $1,500 contribution to her IRA and Richard makes a $1,500 contribution to his IRA, what is the Saver's Credit Virginia and Richard will be eligible for? $0 $1,500 $2,000 $3,000 $4,000
Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Bill lives with Ashley, and she fully supports him. Bill spent 2018 traveling in Europe and was not a college student. He had gross income of 4,655 in 2018. Bill paid 4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the 4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2018, and many of her expenses were not reimbursed by her health insurance. Ashley owns Panda Enterprises, LLC (98-7654321), a data processing service that she operates as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2018 Form 1040, Schedule C for Panda Enterprises shows revenues of 315,000, office expenses of 66,759, employee salary of 63,000, employee payroll taxes of 4,820, business meal expenses (before the 50% reduction) of 22,000, and rent expense of 34,000. The rent expense includes payments related to renting an office (30,000) and payments related to renting various equipment (4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are 23,000 per year. Ashley has an extensive stock portfolio and has prepared the following analysis: Note: Ashley received a Form 1099B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2018, and these are both ordinary dividends and qualified dividends. Ashley had 800 of interest income from State of Ohio bonds and 600 of interest income on her Wayne Savings Bank account. She paid 25,000 of alimony to her former husband. His Social Security number is 123-45-6788. Ashley itemizes her deductions and provides the following information, which may be relevant to her return: Ashley made a 26,000 estimated Federal income tax payment, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2019 taxes. Compute Ashleys net tax payable or refund due for 2018. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 4, 5, A, C, D, and SE and Form 8949. Ashley qualifies for the 199A deduction for qualified business income. Be sure to include that in your calculations. Suggested software: ProConnect Tax Online.
John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony of 6,000 per year to Katy and child support of 12,000. The 12,000 of child support covers 65% of Katys costs of rearing Kendra. Kendras Social Security number is 123-45-6789, and Katys is 123-45-6788. Johns mother, Sally, lived with him until her death in early September 2019. He incurred and paid medical expenses for her of 15,588 and other support payments of 11,000. Sallys only sources of income were 5,500 of interest income on certificates of deposit and 5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Johns household. Sallys Social Security number was 123-45-6787. John is employed by the Highway Department of the State of Louisiana in an executive position. His salary is 95,000. The appropriate amounts of Social Security tax and Medicare tax were withheld. In addition, 9,500 was withheld for Federal income taxes and 4,000 was withheld for state income taxes. In addition to his salary, Johns employer provides him with the following fringe benefits. Group term life insurance with a maturity value of 95,000; the cost of the premiums for the employer was 295. Group health insurance plan; Johns employer paid premiums of 5,800 for his coverage. The plan paid 2,600 for Johns medical expenses during the year. Upon the death of his aunt Josie in December 2018, John, her only recognized heir, inherited the following assets. Three months prior to her death, Josie gave John a mountain cabin. Her adjusted basis for the mountain cabin was 120,000, and the fair market value was 195,000. No gift taxes were paid. During the year, John reported the following transactions. On February 1, 2019, he sold for 45,000 Microsoft stock that he inherited from his father four years ago. His fathers adjusted basis was 49,000, and the fair market value at the date of the fathers death was 41,000. The car John inherited from Josie was destroyed in a wreck on October 1, 2019. He had loaned the car to Katy to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Katy nor Kendra was injured. John received insurance proceeds of 16,000, the fair market value of the car on October 1, 2019. On December 28, 2019, John sold the 300 acres of land to his brother, James, for its fair market value of 160,000. James planned on using the land for his dairy farm. Other sources of income for John are: Potential itemized deductions for John, in addition to items already mentioned, are: Part 1Tax Computation Compute Johns net tax payable or refund due for 2019. Part 2Tax Planning Assume that rather than selling the land to James, John is considering leasing it to him for 12,000 annually with the lease beginning on October 1, 2019. James would prepay the lease payments through December 31, 2019. Thereafter, he would make monthly lease payments at the beginning of each month. What effect would this have on Johns 2019 tax liability? What potential problem might John encounter? Write a letter to John in which you advise him of the tax consequences of leasing versus selling. Also prepare a memo addressing these issues for the tax files.
Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon does not want 3 to go to the Presidential Election Campaign Fund. Devons wife, Ariane, passed away in 2014. Devons son, Tom, who is age 18, resides with Devon. Toms Social Security number is 123-45-6788. Devon owns a sole proprietorship for which he uses the accrual method of accounting and maintains no inventory; the business operates as Devons Copy Shop, 422 E. Main Street, Albuquerque, NM 87131, IRS business activity code: 453990. His revenues and expenses for 2018 are as follows. Other income received by Devon includes the following. During the year, Devon and his sole proprietorship were involved in the following property transactions. Stock transactions were reported to Devon on Form 1099B; basis was not reported to the IRS. a. Sold Blue, Inc. stock for 45,000 on March 12, 2018. He had purchased the stock on September 5, 2015, for 50,000. b. Received an inheritance of 300,000 from his uncle, Henry. Devon used 200,000 to purchase Green, Inc. stock on May 15, 2018, and invested 100,000 in Gold, Inc. stock on May 30, 2018. c. Received Orange, Inc. stock worth 9,500 as a gift from his aunt, Jane, on June 17, 2018. Her adjusted basis for the stock was 5,000. No gift taxes were paid on the transfer. Jane had purchased the stock on April 1, 2012. Devon sold the stock on July 1, 2018, for 22,000. d. On July 15, 2018, Devon sold one-half of the Green, Inc. stock for 40,000. e. Devon was notified on August 1, 2018, that Yellow, Inc. stock he purchased from a colleague on September 1, 2017, for 52,500 had become worthless. Although he understood that investing in Yellow was risky, Devon did not anticipate that the corporation would declare bankruptcy. f. On August 15, 2018, Devon received a parcel of land in Phoenix worth 220,000 in exchange for a parcel of land he owned in Tucson. Because the Tucson parcel was worth 245,000, he also received 25,000 cash. Devons adjusted basis for the Tucson parcel was 210,000. He originally purchased it on September 18, 2015. g. On December 1, 2018, Devon sold the condominium in which he had been living for the past 20 years (1844 Lighthouse Lane, Albuquerque, NM 87131) and moved into a rented townhouse. The sales price was 480,000, selling expenses were 28,500, and repair expenses related to the sale were 9,400. Devon purchased the condominium for 180,000. Devons potential itemized deductions, exclusive of the aforementioned information, are as follows. During the year, Devon makes estimated Federal income tax payments of 35,000. Compute Devons lowest net tax payable or refund due for 2018 assuming that he makes any available elections that will reduce the tax. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 4, 5, A, B, C, D, and SE and Forms 4562, 8824, and 8949. Suggested software: ProConnect Tax Online.

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