Question

1. Todd, who works for a public accounting firm, had the following transactions for 2018: Salary $ 85,000 Moving expenses incurred to change jobs (12,000) Inheritance received from deceased uncle 300,000 Life insurance proceeds from policy on uncle’s life (Todd was named the beneficiary) 200,000 Cash prize from church raffle 3,000 Payment of church pledge (4,500) >> What is Todd’s AGI for 2018?

2. In 2018, Alice earns a salary of $55,000, has capital gains of $3,000, and receives interest income of $5,000. Her husband died in 2017. Alice has a dependent son, Tyrone, who is age 8. Her itemized deductions are $9,000. a.>>What is her filing status? b. >>Calculate Alice’s taxable income for 2018.

3. Palmer was employed during the first six months of 2018 and earned a $90,000 salary. During the next 6 months, he collected $7,200 of unemployment compensation, borrowed $6,000 (using his personal residence as collateral), and withdrew $1,000 from his savings account (including $60 interest). When he left his former employer, he withdrew his retirement benefits (a qualified annuity) in a lump-sum of $50,000. He made no contributions to the plan. Palmer’s parents loaned him $10,000 (interest-free) on July 1 of the current year, when the Federal rate was 3%. Palmer did not repay the loan during the year and used the money for living expenses. >>Calculate Palmer’s adjusted gross income for the year.

4. (A) Leah, a widow, is retired and receives $20,000 interest income and dividends and $10,000 in Social Security benefits in 2018. >>How much of her Social Security benefits are taxable? (B) Same facts as above. Leah is also considering selling a stock at an $8,000 gain. >>What will be the increase in Leah’s taxable Social Security benefits if she sells the stock?

5. Judy was injured in an automobile accident in 2018. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement: Damages for 25% loss of the use of her right arm $200,000 Medical expenses 30,000 Loss of wages 10,000 Punitive damages 100,000 $340,000 The defendant’s insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages amount. Instead, the company offers to pay her $300,000 for damages to her arm and $30,000 medical expenses. >> Assuming Judy is in the 35% marginal tax bracket, will her after-tax proceeds from accepting the offer be equal to what she considers to be her actual damages (listed above)?

6. Martin is a single individual with a salary of $100,000. He does not participate in a retirement plan at work. Martin incurred and paid the following expenses during 2018: Medical expenses $ 5,000 Alimony (Pre-2019 divorce agreement) 24,000 Charitable contributions 2,000 Casualty loss (after $100 floor) 1,000 Mortgage interest on personal residence 4,500 Property taxes on personal residence 4,200 Moving expenses 2,500 Contribution to a traditional IRA 4,000 State & local income taxes paid 1,300 (a) >> Calculate Martin’s deductions for AGI. (b) >> Calculate Martin’s deductions from AGI. (c) >> Should he itemize or take the standard deduction for 2018? Show all calculations

7. Calculate the net income (income and deductions) includible in taxable income for the following hobby in 2018: Income $23,000 Mortgage interest and property taxes allocable to hobby 12,000 Depreciation 4,000 Supplies and fees 7,000 Telephone for hobby 3,000

Answer 1

Answer for question no. 7:-

Computation of Net Income of Hobby (income and deductions) in 2018 as follows:-

A. Income in 2018 = $23,000

Less :- Deduction Allowed Item Wise

1. Mortgage Interest and property taxes : $12000

2. Supplies and Fees : $7000

3. Telephone : $3000

4. Depreciation : $1000

Note : Depreciation limits only as follows:-

($23000 - $12000 - $7000 - $3000 = $1000)

B. Total Deduction as above = ($23,000)

C. Total     = $ 0