Question

Read the following letter and help Shady Slim with hls tax situation. Please assume that his gross Income Is $173,520 (which consists only of salary) for purposes of this problem. December 31, 2018 To the frlendly student tax preparer: HI·it's Shady Slim again. I just got back from my 55th birthday party, and I'm told that you need some more information from me In order to complete my tax return. I'm an open book! I'll tell you whatever think you need to know Let me tell you a few more things about my life. As you may recall, I am divorced from my wife, Alice. I know that It's unusual, but I have custody of my son, Shady, Jr. The Judge owed me a few favors and I really love the kid. He lives with me full-time and my wife gets him every other weekend. I pay the vast majority of my son's expenses. I think Alice should have to pay some child support, but she doesn't have to pay a dime. The Judge didn't owe me that much, I guess. I had to move this year after getting my Job at Roca Cola. We moved on February 3 of this year, and I worked my Job at Roca Cola for the rest of the year. I still Ive In the same state, but I moved 500 miles away from my old house. I hired a moving company to move our stuff at a cost of $2,320, and I drove Junior In my car. Junlor and I got a hotel room along the way that cost us $65 (I love Super 8!). Can you belleve I'm still paying off my student loans, even after 15 years? I pald a total of $18,720 In Interest on my old student loans this year Remember when I told you about that guy that hit me with hls car? I had a bunch of medical expenses that were not relmbursed by the lawsult or by my Insurance. I Incurred a total of $20,200 In medical expenses, and I was only relmbursed for $11,100. Good thing I can write off medical expenses, right? I contributed a lot of money to charity this year (and have recelpt documentation for all contributions). I'm such a nice guy! gave $1,020 In cash to the March of Dimes. I contributed some of my old furniture to the church. It was some good stuff! l contributed a red velvet couch and my old recliner. The furniture Is considered vintage and Is worth $5,100 today (the appralser surprised me!), even though I only pald $1,020 for t back In the day. When I contributed the furniture, the pastor sald he didn't like the fabric and was going to sell the furniture to pay for some more pews In the church. Oh well, some people Just have no taste, right? Roca Cola had a charity drive for the United Way this year and I contributed $102. Turns out, I don't even miss It, because Roca Cola takes It right off my paycheck every month.$17 a month starting in July. My pay stub verifies that contributed the $102 to the United Way. Oh, one other bit of charity from me thls year. An old buddy of mine was down on hls luck. He lost his Job and hls house. I gave hlm $510 to help hlm out. I pald a lot of money In Interest thls year. I pald a total of $970 In personal credit card Interest. I also pald $18,100 In interest on my $520,000 home mortgage that helped me buy my dream home. I also pald $2,040 In real estate taxes for my new house A few other things I want to tell you about this year. Someone broke Into my house and stole my kid's brand new bicycle and my set of golf clubs. The total loss from theft was $920. I pald $135 In unlon dues this year. I had to pay $1,200 for new sults for my Job. Roca Cola requires its managers to wear sults every day on the job. I spent a total of $1,320 to pay for gas to commute to my Job this year Oh, thls Is pretty cool. I've always wanted to be a firefighter. I spent $1,420 In tultion to go to the local firefighter's school. I did this because someone told me that I can deduct the tuition as an ltemized deduction, so the money would be coming back to me That should be all the Information you need right now. Please calculate my taxable Income and complete pages 1 and 2 of Form 1040 (through taxable Income, lne 43) and Schedule A. You're still doing this for free, right?

Answer 1

Ans) Calculation of AGI;

Gross Income (as stated) - $173,520

Less; Moving Expenses -

Moving company- $2320

Hotel Cost- $65

Fuel Exp- (500*24¢)- $120 $2,505

AGI - $171,015

Calculation Of Taxable Income;

Items to be deducted-

  Mortgage Interest- $18100

Real Estate Taxes- $2040

Total Charity - $2142

Total deduction- $22282

Therefor Tax payable before exemptions=  AGI - Deduction = $171015 - $22282

= $148,733

Less Personal & Dependency Exemptions ;$4150

Net Taxable Income $144,583

Notes; Non-Deductible items

1)Supper

2) Medical expenses are non-deductible as they dont cross the 10% of AGI.

3) Tuition fees are non-deductible.

4) Losses from theft should surpass 10% of your AGI to come under deductible items.

5) Union dues,suits,gas etc are non-deductible items.