Question

Comprehensive Problem (Tax Return Problem).

Harvey and Betty Duran, both age 37, are married with one dependent child. Determine their taxable income from the following information for 2018, and their tax liability. Both the ABCand XYZ partnerships are passive activities. Assume dividends are taxed as ordinary income.

Harvey's salary $45,000

Betty's salary 62,000

Dividends received from domestic corporations (nonqualified) 11,000

Interest 7,000

Itemized deductions 6,920

Net loss from ABC Partnership (acq. 1983) (14,200)

Net loss from XYZ Partnership (acq. 1988) (6,000)

Harvey's business income (moonlighting) 7,700

Harvey's business deductions (before home office expenses) 22,000

Harvey's home office expenses 10,500

Net loss on rental property (31,000)

Federal Income tax withheld 9,600

Compute taxable income and tax using the standard deduction and exemptions applicable to 2018 and the 2018 tax rate schedules.

Answer 1

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