Question

Graded assignment 5

Gerald and Patty Hanson are married taxpayer who have a 12 year old son. The following is their income and expenses for 2019 (you may opt to calculate for 2018):

• Gerald’s w-2 wages:                                        $80,000
• Patty’s w-2 wages:                                          40,000
• Patty’s sole proprietorship
  (Patty is a noted sculptor)
  • Sales                     $20,000
  • Materials               (8,000)
  • Depreciation        (1,000)
• Interest income on their investments     $5,000
• Dividend income                                               500

In additional, Gerald and Patty incurred the following expenses:

• Prescription drugs (after insurance)                                         $450
• Vitamins                                                                                                100
• Medical insurance premiums                                                   1,350
• Braces for their son (not covered by insurance)                1,500
• Clinic and hospital bills (after insurance)                                   800
• Property taxes on home                                                                5,000
• State income taxes
  • Withheld from their w-2                                               6,000
  • Estimated payments                                                     400
• Federal income taxes withheld                                            20,000
• State and local sales tax paid on new personal auto         1,000
• Interest on home mortgage                                                     10,000
• Interest paid on credit cards                                                  2,400
• Cash contributions to church                                                    3,000
• Contribution of ABC stock to United Way
  (FMV $10,000, adjusted basis $2,000)
• Patty donated a sculpture to the local art museum
  The sculpture was appraised at $5,000.
• Gerald, a CPA, paid $300 for his CPA license. His employer does not reimburse the cost for the license.

In addition, Gerald and Patty drove 300 miles this year for medical and dental treatments. Patty also drove 1000 miles to attend a conference for her church. Patty was not a delegate to this conference.

Required:

1.   Determine Gerald and Patty’s adjusted gross income for 2018.
   
2. Determine Gerald and Patty’s itemized deductions.
   
3. Determine Gerald and Patty’s taxable income.

Answer 1

А D E F G لم - B C Gerald and Pettys Computation of Total Income & Taxable income For the Year 2018 ته ن د دی Amount in $ Amount in $ 5 Particulars 6 Income for Wages 7 Wages of Gerald 8 Wages of Pettys 9 Total 10 11 Standard Deduction (See Note 5) 80,000 40,000 1,20,000 1,20,000 13 Net Income 14 15 Income for Business 16 Sales 17 Less: Material 18 Less: Depreciation 19 Net Income 20,000 8,000 1,000 11,000 20 22 Income from Other Sources 23 Interest Income 24 Dividend Income 5,000 25 5500 27 Total Adjusted Gross Total Income 1.25,500 28 Sheet1 Sheet6 Sheet7 Sheet2 Sheet3 Sheet4 Sheet4 (2) Ready

BICIDI A 9 Less: Itemized Deductions 0 State & Fedaral Income Tax 1 State withhoilding Tax 2 Federal Income tax Withheld 3 State and local tax on personel auto 4 (Limited to $10000) 6,000 20,000 1,000 10,000 6 Interest on Home loan Mortgage 10,000 8 Medical Expenses 59 Actual 10 Precription Drugs 11 Vitamins 12 Medical Insurance Premium 13 Clinic and Hospital Expenses 14 Total 45 or 10% of AGI 450 100 1,350 800 2,700 9,413 2,700 47 Cash Contribution to Church 3,000 18 19 Houe propery Taxes 50 Total Itemized Deductions 5,000 30,700 52 Total Taxable income 94,800 53 55 Note: 56 1) Interest on credit cards are not itemized deduction therfore not considered Sheet1 Sheet6 Sheet7 Sheet2 Sheet3 Sheet4 Sheet4 (2) + Ready

C G H • Note: 1) Interest on credit cards are not itemized deduction therfore not considered 2) Donations to Charitable are considered therefore donation to measum is not considered. 33) Non Reimbursable Expenses are not allowable for deductions. 4) Increament of FMV over cost of investment in ABC stock is not considered. 5) Standard Deduction of $24000 for married filing return jointly is not beneficial therefore itemized deductions considered. m moooo Sheet1 Sheet6 Sheet Sheet2 Sheet Sheet4 Sheet4 (2) eady