Question

Sally is a 36 year-old, divorced, mother of two who lives in West Chester, PA. Her two boys, Alex (age 5) and Andrew (age 8) live with her full-time and attend Chesterbrook Academy, a nearby private elementary school. Sally works as a Software engineer for Cerner Corporation in Malvern, PA. Sally’s aging mother also lives with them, and Sally provides full financial support for her. The following transactions occurred over 2018. 1) Sally received $125,000 salary in 2018 from her job at Cerner. 2) Sally generated $440 interest income in 2018 from her savings account. 3) Sally received $35,000 in alimony payments from her ex-husband, Zach. He also paid $62,500 in child support for their two children. The child support helps Sally pay for their private school tuition, food, clothes, and other necessities. Sally and Zach have been divorced since 2016 (the year their divorce agreement was signed). 4) On a particularly-cold night in January, a pipe in Sally’s kitchen froze and burst. Costs to repair the pipe and fix the water damage were estimated at $1,500. Luckily Sally’s brother John is a plumber and agreed to fix it for free. 5) For the past year Sally has been trying to sell her house and move from a three-bedroom house to a four-bedroom house for her, her two boys, and her mom. Now that Alex and Andrew are getting older they each need their own room! In February she finally sold her home for $470,000. Her and her ex-husband bought it when Andrew was born, in 2010, for $200,000. She used the proceeds of the sale on her downpayment for her new home, just five minutes down the street and closer to the boys school! 6) In March, Sally was in a car accident which totaled her car. Cerner gave her an interest-free loan of $20,000 so that she could afford the downpayment on a new SUV. Assume the applicable federal interest rate is 4 percent. 7) In November of 2014 Sally purchased 10 shares of stock in Best Buy Co Inc. for $35 per share. In May of 2015 she purchased 10 more shares for $34 per share. On April 7th of 2018 Sally sold 10 shares of her Best Buy stock for $71 per share. She paid $50 in brokerage fees. She uses the specific identification method in calculating her capital gains and losses on securities, in order to minimize her current-year taxable income. 8) Sally needed some extra money for the kids’ Christmas presents. On December 9th she sold corporate bonds for $900. She had originally purchased them in February of this year for $1,000. Ignoring tax credits for now, calculate Sally’s taxable income, and her tax liability for the year. Does she have any carryforwards she needs to keep in mind for 2019?

Answer 1

please refer below excel screen shot