Question

(20 points) Sylvia files as a head of household and is 58 years old during 2018. She provides all the support for her elderly father who lives in a nearby nursing home and her father qualifies as her dependent in 2018. Sylvia has the following tax information for 2018: 1. $190,000 Salary income.... ....8,000 ...7,000 Short-term capital gain.. - Medical expenses paid for herself and her father...19,375 - State and local sales taxes paid6,000 -Property tax paid on residence.. - Mortgage interest expense on residence.. 10,000 -Interest paid on home equity loan taken out in 2018 to buy a new car r.....,500 Cash contributions to church.. Unreimbursed employee expens....6,400 2,500 ...600 Casualty loss after $100 floor due to uninsured theft of her car ..24,000 Compute Sylvia's 2018 taxable income and the amount of tax she still owes or that is due to her er any allowable tax credits and prepayments of $35,000.

Answer 1

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Answes are highlighted in Yellow: Solution: Particulars Year 2018 Salary Income 190000 $8,000 Interest Income $7,000 Short-term capital gain Gross Income and AGI 205000 Deduction from AGI: $ 18,000 Standard deduction Itemized deductions: $4,000 Medical expense (19375)-(205000*7.5%) $ 10,000 State and local taxes and Property tax Capped $ 10,000 Mortgage interest expense (eliminated) Interest on home equity $ 2,500 Charitable contribution (eliminated) (eliminated) (Disallowed) Unreimbursed employee expense Tax return preparation fees Casualty loss $ 26,500 Total Itemized deduction $26,500 Greater of Standard or itemized deduction Taxable Income 178500 $37,418 Gross Tax Liability (30698)+(178500-157500) 32% Other Dependent credit 500 Less: $ 35,000 $ 1,918 Less: Prepayment Tax Still Owe or Due