Note: This problem is for the 2018 tax year. Lance H. and Wanda B. Dean are marr
ID: 2337185 • Letter: N
Question
Note: This problem is for the 2018 tax year.
Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm.
During 2018, the Deans had the following receipts:
Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to pay alimony and child support—the alimony payments were to terminate if Wanda remarried.
In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settlement of the personal injuries she sustained.
The Deans had the following expenditures for 2018:
The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution.
The Deans' household includes the following, for whom they provide more than half of the support:
Penny graduated from high school on May 9, 2018, and is undecided about college. During 2018, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda's widower father who died on January 20, 2018. For the past few years, Wayne qualified as a dependent of the Deans.
Federal income tax withheld is $5,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld.
Required:
Determine the Federal income tax for 2018 for the Deans on a joint return by providing the following information that would appear on Form 1040 and Schedule A. They do not want to contribute to the Presidential Election Campaign Fund. All members of the family had health care coverage for all of 2018. If an overpayment results, it is to be refunded to them.
Salaries ($60,000 for Lance, $41,000 for Wanda) $101,000 Interest income— City of Albuquerque general purpose bonds $1,000 Ford Motor company bonds 1,100 Ally Bank certificate of deposit 400 2,500 Child support payments from John Allen 7,200 Annual gifts from parents 26,000 Settlement from Roadrunner Touring Company 90,000 Lottery winnings 600 Federal income tax refund (for tax year 2017) 400Explanation / Answer
Answer:
Lance H and Wanda B. Senior member are hitched now. Wanda was beforehand hitched to John Allen.
Penny and kyle are two offspring of Wanda B and John Allen however after separation the guardianship of youngsters is with wanda b.
Presently numerical part:
Salaries. = 101000
Interest(after tds) = 1550
Dividend(after tds) = 950
Gifts from parents= excluded
Pay from street :
Runner organization. = 90000
Lottery( after 30% tds) = 420
It Refund. =400
Total =194320
Deductions:
Enthusiasm on home loan. =6000
Chruch promise. =3600
Life insurance premium. =1200
Commitment to ira. =5000
Commitment to reelection fund=500
Net income =178020
Things to recollect:
a.) Withheld expense ought to be deducted from tax payable.
2) Penny pay ought not be clubbed with her folks pay.
Income:
Wages, compensations, tips and so forth = 101000
Taxable interest = 2500
Taxable refunds= 400
Rental land, royalities = - 6000
Other income= 99100
Total income = 197000
Balanced gross salary: 197000
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