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:
Interest income on City of Phoenix bonds
Interest income on US Treasury bonds
Qualified cash dividends
FMV of 50 shares of Marty Co. common stock received as a stock dividend
Refund of 2017 Arizona income tax (the Griswolds itemized in 2017)
Net rental income from 100% owned rental house*
Share of Moose Partnership loss**
Share of DF Kaye S Corporation income***
Life insurance proceeds received on the death of Clark’s father
Short-term capital gains
Short-term capital losses
25% Long-term capital gains
15% Long-term capital gains
15% Long-term capital losses
Home mortgage interest ($400,000 principal)
Home equity loan interest ($110,000 principal)
Condo loan interest ($75,000 principal)
Car loan interest
Credit card finance charges
Home property taxes
Condo property taxes
Condo maintenance fees
Car tags (ad valorem part)
Arizona income tax withheld
Federal income taxes withheld
Medical insurance premiums (paid by the Griswolds, not part of an employer plan)
Unreimbursed medical bills
Unreimbursed employee business expenses
* 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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