David and Doris Kelley were divorced on February 3, 2014. They lived apart durin

Question

David and Doris Kelley were divorced on February 3, 2014. They lived apart during 2014. The divorce decree required David to make the following payments: a. Transfer full title to their jointly owned family home to Doris. Fair market value of the home is $180,000, basis $150,000. b. $1,000 per month mortgage payments on the house, above. The mortgage has 20 years remaining before being fully paid off, but the payments would end on her death. c. $2,000 per month for 10 years support payments to Doris, of which $600 per month is child support. d. Doris insisted that the children attend private schools. In 2014, David paid $1,500 in tuition for the childrens private high school. David paid his lawyer $5,000 to represent him in the divorce proceedings. David and Doris agreed that Doris would maintain a home for the children. Further, Doris agreed to allow David to claim one child as a dependency exemption. This agreement was put in writing and signed by Doris. e. Besides the divorce, David has had a big year financially. He owns an apartment house and he requires each new tenant to place a $750 security deposit with him before moving into the apartment. When the tenant ultimately vacates the apartment, David will refund the deposit. In 2014, David collected $3,750 in security deposits and rental income of $15,000. David entered a local raffle in 2014. David won first prize, which was a new automobile with a window price of $20,000. He checked with several local car dealers and was positive that if he had purchased a similar car on his own, the price would have been $18,200. David loaned his sister Lois $5,000. Lois was repaying the loan at $100 per month plus interest of $40. Since Lois was about to depart on an extended vacation on December 2, 2014, she gave David $200 plus interest of $80 to cover the months of December and January. David has a good job that pays an annual salary of $50,000. In 2014, business was very good and in December 2014 bonuses were announced for the employees. David earned a $4,000 bonus for 2014. Bonuses would be mailed to the employees during the first week of January 2015. David has itemized deductions of $20,000. Determine Davids 2014 taxable income.

Explanation / Answer

David Taxable Income for year 2014 Total Income of David Amount Income From Salary $50,000.000 Annual Bonus $4,000.000 Income from Rent of House $15,000.000 Income from Security deposit $3,750.000 Income from Automobile window price $20,000.000 Loan Recovery Amount $280.000 Total Income of David $93,030.000 Total Expense of David Mortage repayment ($1000 * 12) $12,000.000 Given to Doris ( $2000 * 12) $24,000.000 Tution fees of child $1,500.000 Charges of lawyer $5,000.000 Loan to sister $5,000.000 Purchase of Car $18,200.000 Total Expense of David $65,700.000 Total Income ( Income - Expense) $27,330.000 Itemized Dedution $20,000.000 Total Taxable Income $7,330.000

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