Question

Just Need the C part.

2. This question is worth 25 points Fatima and Eric (both age 28), are married and file a joint tax return. They are cash basis taxpayers. 2018 income includes: 1. combined salary of $200,000 2. Fatima was in a car accident and received compensatory damages of $25,000 for her broken nose. She also received $10,000 in punitive damages 3.. Eric had a student loan. In 2018, when the balance was $23,000, the lender accepted a one time payment of $8,000 as full payment, discharging $15,000 of debt. Eric was solvent at the time 4. interest income from Wayne Township bonds in the amount of $2,000 5 refund of 2017 NJ Income Taxes of $1,000 (the couple itemized their deductions in 2017; itemizod deductions exceeded the standard deduction by $3,000). The taxpayers also incurred and paid the following expenses during the year 6 NJ income tax withheld 7 Parking tickets 8 Alimony (Eric was previously married and pays Alimony to his ex-wife 12,000 9Legal fees associated with divorce proccedings-not tax related 10 Charitable contributions paid on 12/30/18 with a credit card. The credit 2,000 400 5,000 card bill was paid 1/15/19 11 Contribution to a ROTH IRA 12 Mortgage payment on principal residence: principal only 13 Mortgage payment on principal residence: interest expense 14 Property taxes (real estate taxes) on personal residence S Nephew, Angel, owns a home and could not make his real estate tax 4,000 10,000 4,000 9,000 6,000 payment as he is unemployed. The couple paid Angcl's taxes. 16 Federal income tax payments withheld 17. Medical expenses 13,000 15,000 A. Certain items above require special attention. Provide a sentence or two explaining limitations, rules calculations of income/deductions, ctc. for the following items: 3-Why is this debt that was discharged taxable or not? -What is the tax benefit rule? Apply it to the facts. 6 and 14- What are these deductions referred to as? Is there a cap on these expenses? If so, what is the cap? 10 - In what year can this expense be deducted (2018 or 2019)? Why? 15- Why are the taxpayers able to deduct these costs or why not? 17 - State the rule for deducting modical expenses and apply the rule to the facts (i.e provide a detailed calculation of the amount of medical expenses that can be deducted). B. List all non-deductible expenses. C. Using the tax formula, beginning with Income Broadly Conceived, provide a detailed calculation of the couple's 2018 taxable income (do NOT calculate the income tax), Your answer MUST follow the tarx formula (do not simply include totals, list all itcms), or points will be deducted! Be certain to show your comparison of the standard deduction amount to total itemized deductions.

Answer 1

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