Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessie’s craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie’s college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Based on their estimates, determine Joe and Jessie’s AGI and taxable income for the year and complete pages 1 and 2 of Form 1040 (through taxable income, line 10), Schedule 1 and Schedule A. Assume that the employer portion of the self-employment tax on Jessie’s income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:
Income:
Joe’s salary $129,100
Jessie’s craft sales 18,400
Interest from certificate of deposit 1,650
Interest from Treasury bond funds 716
Interest from municipal bond funds 920
Expenditures:
Federal income tax withheld from Joe’s wages $13,700
State income tax withheld from Joe’s wages 6,400
Social Security tax withheld from Joe’s wages 7,482
Real estate taxes on residence 6,200
Automobile licenses (based on weight) 310
State sales tax paid 1,150
Home mortgage interest 14,000
Interest on Masterdebt credit card 2,300
Medical expenses (unreimbursed) 1,690
Joe’s employee expenses (unreimbursed) 2,400
Cost of Jessie’s craft supplies 4,260
Postage for mailing crafts 145
Travel and lodging for craft shows 2,230
Self-employment tax on Jessie’s craft income 1,662
College tuition paid for Lizzie 5,780
Interest on loans to pay Lizzie’s tuition 3,200
Lizzie’s room and board at college 12,620
Cash contributions to the Red Cross 525
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MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
- Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessie's income is $837. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joe's salary $ 134,700 Jessie's craft sales 18,460 Interest from…arrow_forward[The following information applies to the questions displayed below.] Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Assume that the employer portion of the self-employment tax on Jessie's income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Note:- Do not…arrow_forward[The following information applies to the questions displayed below.] Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessie's income is $717. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joe's…arrow_forward
- [The following information applies to the questions displayed below.] Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Assume that the employer portion of the self-employment tax on Jessie's income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income:…arrow_forwardJane and Robert Brown are married and have eight children, all of whom are eligible to be claimed as the couples dependents. Robert earns 196,000 working as senior manager in a public accounting firm, and Jane earns 78,000 as a second-grade teacher. Given their large family, they live in a frugal manner. The Browns maintain a large garden and some fruit trees from which they get most of their produce, and the children take family and consumer science classes so that they can help make the familys clothing. The Browns record no gross income other than their salaries (all of their investment income is earned from qualified retirement savings), and their itemized deductions are less than the standard deduction. In addition, they incur no additional adjustments or preferences for AMT purposes. a. What is the couples 2019 regular tax liability? b. What is the couples 2019 AMT? c. Express the calculation of the couples AMT for 2019 as a Microsoft Excel formula. Place any parameter that could change annually in a separate cell, and incorporate the cell references into the formula.arrow_forwardVictor and Maria, both in their late 30s, have two children: Jacob, age 13, and Nicholas, age 15. Victor has had a long sales career with a retail appliance store in Fargo, North Dakota earning $53,000 annually. Maria works as a medical records assistant earning $32,000. (a) Victor and Maria regularly buy and sell a number of items on eBay, Craig’s List, and through the free community newspaper, from which they earn about $4,000 each year. What will the accumulated future value of this stream of investment contributions be in 20 years if the annual earnings were invested annually and provided a 5% return each year?arrow_forward
- Heather and Dan Holt met while both were employed in the interior trim and upholstery department of an auto manufacturer. After their marriage, they decided to earnsomeextra income by doing small jobs involving canvas, vinyl, and upholstered products. Their work was considered excellent, and at the urging of their customers, they decided to go into business for themselves, operating out of the basement of the house they owned. To do this, they invested $120,000 cash in their business. They spent $10,500 for a sewing machine (expected life 10 years) and $12,000 for other miscelianeous tools and equipment (expected life 5 years). They undertook only custom work, with the customers purchasing the required materials, to avoid stocking any inventory other than supplies. Generally, they required an advance deposit on all jobs. The business seemed successful from the start, as the Holts received orders from many customers. But they felt something was wrong. They worked hard and charged…arrow_forwardAramis and Danielle Bisset, both in their mid-20s, have been married for 4 years and have two preschool-age children. Aramis has an accounting degree and is employed as a cost accountant at an annual salary of $64,000. They're now renting a duplex but wish to buy a home in the suburbs of their rapidly developing city. They've decided they can afford a $425,000 house and hope to find one with the features they desire in a good neighborhood. The insurance costs on such a home are expected to be $1,000 per year, taxes are expected to be $3,000 per year, and annual utility bills are estimated at $1,800 - an increase of $500 over those they pay in the duplex. The Bissets are considering financing their home with a fixed-rate, 30-year, 6 percent mortgage. The lender charges 2 points on mortgages with 20 percent down and 3 points if less than 20 percent is put down (the commercial bank that the Bissets will deal with requires a minimum of 10 percent down). Other closing costs are estimated at…arrow_forwardVictor and Maria hernandez Victor and Maria, both in their late 30s, have two chil- dren: John, age 13, and Joseph, age 15. Victor has had a long sales career with a retail appliance store. Maria works part-time as a medical records assistant. The Her- nandezes own two vehicles and their home, on which they have a mortgage. They will face many financial challenges over the next 20 years, as their children drive, go to college, and leave home and go out in the world on their own. Victor and Maria also recognize the need to further prepare for their retirement and the challenges of aging. Victor and Maria spent some time making up their first balance sheet, which is shown in Table 3-2. Victor and Maria are a bit confused about how various financial activities can affect their net worth. (a) Assume that their home is now appraised at $200,000 and the value of their automobile has dropped to $8,500. Calculate and characterize the effects of these changes on their net worth and on…arrow_forward
- Karen and Andy own a beach house. They have an agreement with a rental agent to rent it up to 200 days per year. For the past three years, the agent has been successful in renting it for 200 days. Karen and Andy use the beach house for one week during the summer and one week during Thanksgiving. Their daughter, Sarah, a college student, has asked if she and some friends can use the beach house for the week of spring break. Advise Karen and Andy on how they should respond, and identify any relevant tax issues. If the residence is rented for 100 X days or more in a year and is not used for personal purposes for more than the greater 14 days or 10 % of the total days rented, the residence is treated as rental property. The expenses must be allocated between personal and rental days if there are any personal use days during the year. In prior years, the beach house has been classified as rental property, since the personal use did not exceed limits outlined above. Thus, if the total…arrow_forwardAllen and Meagan, aged 43 and 33, have 2 children aged 6 and 8. They live in their own home, which is jointly owned. The family home is currently worth $675,000, which is on a $275,000 mortgage loan. They have contents worth $100,000. Allen works as a part-time accountant and earns a $32,000 annual salary. In addition to this job, he runs an accounting services business, which earns him $25,000 annually. This business was valued at $45,000 by an independent assessor when he applied for a loan last year, which was not approved. Allen’s employer pays superannuation guarantee payments to an industry superannuation fund, which has accumulated to $50,000. This superannuation fund provides term life cover of $100,000 for Allen. Meagan works as a sales manager and earns $75,000 p.a. Currently, she has $175,000 in her superannuation account. She doesn’t have life insurance cover. On average, Allen, Meagan and the family have monthly living expenses amounting to $8,500. They would like to…arrow_forwardVictor and Maria Hernandez Victor and Maria, both in their late 30s, have two children: John, age 13 and Joseph, age 15. Victor has had a long sales career with a retail appliance store. Maria works part-time as a medical records assistant. The Hernandezs own two vehicles and their home, on which they have a mortgage. They will face many financial challenges over the next 20 years, as their children drive, go to college, and leave home and go out in the world on their own. Victor and Maria also recognize the need to further prepare for their retirement and the challenges of aging. Victor and Maria spent some time making up their first balance sheet, which is shown in the table. Balance Sheet for a Couple with Two Children-Victor and Maria Hernandez, January 1, 2018 Dollars Percent ASSETS Monetary Assets Cash on hand 1,200 0.3% Savings account 4,200 1.1% Victor's checking account 2,700 0.7% Maria's checking account 3,300 0.8% Tax…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT