Question

3. Meredith Grey and Derek Shepherd had a lot going on in 2019. Working as doctors at Seattle Grace Hospital, the married couple earned $231,000 each in salary. The only other person in their household is one, adopted daughter, Zola Grey Shepherd, age 8. At the beginning of the year, Meredith's mother Ellis Grey passed away. From this, Meredith received $250,000 in inheritance and $100,000 from a lump sum payment of life insurance proceeds. Meredith made two different investments with the inheritance and life insurance proceeds. She invested $150,000 of the total $350,000 above in a portfolio of stocks and bonds (none of which were municipal bonds) to save for her and Derek's future retirement. The portfolio of stocks and bonds increases in value by $15,000 over the year but Meredith and Derrick do not sell any of these investments during the year. Finally, Derek and Meredith received an award worth $25,000 based on medical research they had done during the year. They kept the award money (did not donate it) and used it in 2019 for personal expenditures. It required no additional service. At the end of the year, assume that Derek and Meredith did not have any itemized deductions, credits, or prepayments for the year. Based on the above information, determine the following: a. What was the amount of realizable income for Meredith and Derek in 2019? b. What will be included in Meredith and Derek's gross income for 2019 (i.e. what amount is recognizable)? c. What is the best filing status Derrick and Meredith can use? d. Regardless of your answer in a.-c., assume that Meredith and Derek's total gross income for 2019 is $428,000 and they used Married filing jointly as their filing status. Use the individual tax formula and the appropriate Federal Tax Schedule and other values in Appendix D to calculate Meredith and Derek's 2019 tax due at the end of the year.

Answer 1

Realized income includes income that you have actually earned and received. Wages and salary income that you earn, interest and dividend payment from your investment portfolio, If a stock you own rises in value that don't become realized until you actually sell the stock. a. CALCULATION OF REALIZABLE INCOME OF MERIDITH AND DERECK IN 2019 Salary. [$2,31,000 x 2]. = $4,62,000 Inheritance. $2,50,000 Life insurance. $1,00,000 Award amount. $25,000 Total realized income = $8,37,000 b. Gross income for an individual consists of income from wages and salary + other forms of income including pensions, interest, alimony, dividends and rental income. CALCULATION OF GROSS INCOME Salary ($2,31,000 x 2] = $4,62,000 Award. $25,000 Appreciation in the value of $15000 Stock Total. = $5,02,000 C. The best filing status for derrick and Meredith can use is married filing jointly as they can allow basic standard deduction up to $24,400 d. CALCULATION OF INDIVIDUAL TAX RETURN PARTICULARS. Total gross income. Less : deduction. Adjusted gross total Income Tax. MEREDITH. $2,14,000. $12,200. $2,01,800. DEREK $2,14,000 $12,200 $2,01,800 $45,892.5. $45,892.5 TAX CALCULATION : [ $32,748.50 + 32% ( $2,01,800 - $1,60,725)] = $45,892.5 FOR BOTH