tax based accounting problem – Essay Writers

ACC 460 TAX PROBLEM #5, FALL 2018 (15 pts.)
PART 1.Clark and Ellen Griswold are married and wish to file a joint return for 2018.They have two dependent children, Audrey (age 17) and Rusty (age 12), who live with them.Their primary residence is in Phoenix, and they own a condo (2nd home) in Flagstaff. They also own a rental house n Mesa. Clark and Ellen have the following items of income and expense for 2018:

Income:

Clark’s salary

$90,000

Ellen’s salary

110,000

Interest income on City of Phoenix bonds

5,000

Interest income on US Treasury bonds

13,000

Qualified cash dividends

10,000

FMV of 50 shares of Marty Co. common stock received as a stock dividend

7,500

Refund of 2017 Arizona income tax (the Griswolds itemized in 2017)

3,000

Net rental income from 100% owned rental house*

8,500

Share of Moose Partnership loss**

(12,000)

Share of DF Kaye S Corporation income***

20,000

Life insurance proceeds received on the death of Clark’s father

100,000

Short-term capital gains

10,000

Short-term capital losses

(14,000)

25% Long-term capital gains

13,000

15% Long-term capital gains

30,000

15% Long-term capital losses

(5,000)

Expenses:

Home mortgage interest ($400,000 principal)

24,000

Home equity loan interest ($110,000 principal)

6,600

Condo loan interest ($75,000 principal)

8,000

Car loan interest

6,000

Credit card finance charges

3,000

Home property taxes

6,000

Condo property taxes

5,000

Condo maintenance fees

2,500

Car tags (ad valorem part)

2,100

Arizona income tax withheld

8,000

Federal income taxes withheld

36,000

Medical insurance premiums (paid by the Griswolds, not part of an employer plan)

10,000

Unreimbursed medical bills

8,000

Charitable contributions

11,000

Unreimbursed employee business expenses

7,500

* The rental house does not meet the definition of a “qualified trade or business” for purposes of the §199A deduction.
**Clark and Ellen invested $10,000 as limitedpartners in the Moose Partnership at the beginning of 2018 .The loss is not the result of real estate rentals. Neither materially participate in the operations of the partnership.
***Ellen is a 50% owner and President of DF Kaye.
REQUIRED:Determine Clark and Ellen’s tax liability, using the tax formula.You must label your work, provide supporting schedules for summary computations, and indicate any carryovers.Present your work in a neat, orderly fashion.

PART 2.Audrey owns a bond mutual fund which was funded from an inheritance from her grandfather. The mutual fund paid $4,800 in interest in 2018.Audrey also earned $2,500 from various part-time jobs during the year.
REQUIRED:Determine Audrey’s tax liability, using the tax formula. Label all work.
 
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