Question

Paul and Donna Decker are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2019. The Deckers live at 1121 College Avenue, Carmel, IN 46032.

	Paul	Donna
Salary	68000	56000
Federal tax   withheld	6770	6630
State tax   withheld	1400	1100
FICA	5202	4284
Social Security	111-11-1112	123-45-6789

 

Donna is the custodial parent of two children from a previous marriage who reside with the Deckers through the school year. The children, Larry and Jane Parker, reside with their father, Bob, during the summer. Relevant information for the children follows:

	Larry	Jane
Age	17	18
Social	123-45-6788	123-45-6787
Months spent	9	9

 

Under the divorce decree, Bob pays child support of $150 per month per child during the nine months the children live with the Deckers. Bob says that he spends $200 per month per child during the three summer months they reside with him. Donna and Paul can document that they provide $2,000 of support per child per year. The divorce decree is silent as to which parent can claim the exemptions for the children.

In August, Paul and Donna added a suite to their home to provide more comfortable accommodations for Hannah Snyder (Social Security number 123-45-6786), Donna’s mother, who had moved in with them in February 2018 after the death of Donna’s father. Not wanting to borrow money for this addition, Paul sold 300 shares of Acme Corporation stock for $50 per share on May 3, 2019, and used the proceeds of $15,000 to cover construction costs. The Deckers had purchased the stock on April 29, 2014, for $25 per share. They received dividends of $750 on the jointly owned stock a month before the sale.

Hannah, who is 66 years old, received $7,500 in Social Security benefits during the year, of which she gave the Deckers $2,000 to use toward household expenses and deposited the remainder in her personal savings account. The Deckers determine that they have spent $2,500 of their own money for food, clothing, medical expenses, and other items for Hannah. They do not know what the rental value of Hannah’s suite would be, but they estimate it would be at least $300 per month. Interest paid during the year included the following:

Home mortgage   interest (Camel Federal Savings and Loan)	7890
Interest on   automobile loan	1660
Interest   on credit card	620

 

In July, Paul hit a submerged rock while boating. Fortunately, he was uninjured after being thrown from the boat and landing in deep water. However, the boat, which was uninsured, was destroyed. Paul had paid $25,000 for the boat in June 2018, and its value was appraised at $18,000 on the date of the accident. The Deckers paid doctor and hospital bills of $12,700 and were reimbursed $2,000 by their insurance company. They spent $640 for prescription drugs and medicines and $5,904 for premiums on their health insurance policy. They have filed additional claims of $1,200 with their insurance company and have been told they will receive payment for that amount in January 2020. Included in the amounts paid for doctor and hospital bills were payments of $380 for Hannah and $850 for the children.

 

Additional information of potential tax consequence follows:

Real estate   taxes paid	6850
Sales tax   paid	1379
Contributions	4600
Appraised value   of books donated to library	740
Refund of   state income tax (itemized)	1520

 

Compute net tax payable or refund due for the Deckers for 2019. Ignore the child tax credit in your computations. If the Deckers have overpaid, the amount is to be credited toward their taxes for 2020

 

Need 1040, sch a, sch 1

 

Benchmarks given:

Taxable income 103979

Tax is 14014 (long term capital gains)

Overpaid 866

Need help with calculating the math in between.