Question

Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2017. She is 45 years old and has been divorced for four years. She receives $1,200 of alimony payments each month from her former husband. Reba also rents out a small apartment building. This year Reba received $30,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental. Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather’s support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia. During the trip, Reba paid $200 for lodging and $85 for meals. Reba’s mother was so excited to have her daughter and granddaughter move back to Georgia that she gave Reba $3,000 to help out with the moving costs. Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost. If possible, Reba thought it would be best to claim the education credit for these expenses. Reba wasn’t sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $2,800 in state income taxes and $6,500 in charitable contributions during the year. She also paid the following medical-related expenses for her and Heather: Insurance premiums $ 4,795 Medical care expenses 1,100 Prescription medicine 350 Nonprescription medicine 100 New contact lenses for Heather 200 Shortly after the move, Reba got distracted while driving and she ran into a street sign. The accident caused $900 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Reba wasn’t able to work for two months after the accident. Fortunately, she received $2,000 from her disability insurance. Her employer, the Central Georgia School District, paid 60 percent of the premiums on the policy as a nontaxable fringe benefit and Reba paid the remaining 40 percent portion. A few years ago, Reba acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,200 of interest income from corporate bonds and $1,500 interest income from City of Denver municipal bonds. Overall, Reba’s stock portfolio appreciated by $12,000 but she did not sell any of her stocks. Heather reported $3,200 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Heather’s only source of income for the year. Reba had $10,000 of federal income taxes withheld by her employer. Heather made $500 of estimated tax payments during the year. Reba did not make any estimated payments. Reba had qualifying insurance for purposes of the Affordable Care Act (ACA).

Amount $ 38,000 14,400 30,000 1,200 19,500 Description Gross Income: Salary Alimony received Rental receipts Gift from mother Disability insurance payments Interest income from corporate bonds Interest income from municipal bonds Gross income Deductions for AGI: Expenses for rental property Moving expenses (2) Total for AGI deductions (3) AGI From AGI deductions: Medical expenses State income taxes Charitable contributions Casualty loss deduction (4) Total itemized deductions (5) Standard deduction (6) Greater of itemized deductions or standard deduction (7) Personal and dependency exemptions (8) Total from AGI deductions Taxable income (9) Tax on taxable income (10) Credits (11) Tax prepayments Tax refund 2,800 6,500

Answer 1

501!-- Particulars Amount Explanation GOOSS Income Salary $ 38.000 Alimony received (4400 T ($ 1200 x2) Rentou receipts 30.000 Gift from mother. foon income $30.00 gift is acuded. 40% Premium is paid asio surance policy/2000 1200 $ 2200 Disability insurance payme ents Interest income from Corporal -te bonds. Interest income from municí - Perl bonds. $0 GOOSS Income. $85800 Deductions for AGI: Gripenses for Rental poefeo 19 500 moving expenses. $2538 (2010+200+327-98) mileage -(19.26 XD-23) - $327 299 2. Total for AGL deduction. $22038 AGI $63762 ($85800-93038) from AGI deductions.

[(4850-4786(.5%x3) medical Expenses $64 State income taxes $2800 charitable contributions $ 6.500 Caualty luss deduction (4) Total itemized deductions $9364 5. Standard deduction) $8700 6. Greated of itemized deductil -ons or Steinddod of ductions Greates 6(4)0015) (2X3800 personal and dependency exempto $ 7600 ros Total from AGI deductions | $16964 $9364+$7600 Taxable income $47198 $63762-16564 Tax on taxable income $ 6459.700 6460 $1240 +5249.715% (44198- 12400) Credits $ 500 Full amount qualifies. 11. Tax Prepayments $10.000 Tax refund. 84040 10.000-[6460-500 Grooss Income = salary + Alimony received & Rental receipts + Disability insurance payments + interest income from corporate bonds. 38.000 +14400 +30 000 € 1200 +2200 c

Gooss Income = $85800 Q. Total for AG I deduction = expenses for Renteel pooleoty t moving Expenses -19500 +2538. $ 22038 Total for AG I deduction 3. AGI (Adjusted Gooss Income): AG9 Gooss Income - Totul for AG I de derection = 85800-38038 $63262 AGI $63762 deductions - a. Total itemized + sate income teves + Charitable contributions medical openses + slate income taxe 64 + 2800 + 6500 Total itemized deductions = $ 9364) 5. Standard deduction - $8700

8. Total from AGI deductions - Total itemized deduction tpersonal and dependency edem -AS. $ $9364 + $7600 = 16964 1 Toteu from AGI deductions = $16964 11. Tax refund a tad prepayments-(tad on talable income -credits] - 10.000-[6460-500] = 10.000-(15960] 24040 Tax refund = $4040