Question

Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children, Charlene, age 17, and Jordan, age 18. Charlene’s Social Security number is 123-45-6788, and Jordan’s Social Security number is 123-45-6787. In 2018, Martin and Michele had the following transactions:

1. Martin received $120,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA taxes were as follows: $7,049 ($113,700 × 6.2%) for Social Security and $1,740 ($120,000 × 1.45%) for Medicare. Martin worked in Mexico from January 1, 2017, until February 15, 2018. His $120,000 salary for 2018 includes $18,000 he earned for January and one-half of February 2018 while working in Mexico.

2. Martin and Michele received $400 interest on Montgomery County (Virginia) school bonds.

3. Martin received $2,300 interest from a Bahamian bank account.

4. Michele received 50 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $2,500 at the time Michele received them, and she did not have the option of receiving cash.

5. Martin and Michele received a $1,200 refund on their 2017 Virginia income taxes. Their itemized deductions in 2017 totaled $14,000.

6. Martin paid $6,600 alimony to his former wife, Rose T. Morgan (Social Security number 123-45-6786). The divorce was finalized in 2015.

7. Martin and Michele kept the receipts for their sales taxes paid of $1,100.

8. Martin and Michele’s itemized deductions were as follows:

   • State income tax paid and withheld totaled $5,100.

   • Real estate taxes on their principal residence were $3,700.

   • Mortgage interest on their principal residence was $2,500.

   • Cash contributions to the church totaled $2,800.

Part 1—Tax Computation

Compute the Alberts’s net tax payable (or refund due) for 2018.

Answer 1