TAX FORM/RETURN PREPARATION PROBLEMS I:7-63 Following is a list of information f
ID: 2370927 • Letter: T
Question
TAX FORM/RETURN PREPARATION PROBLEMSI:7-63 Following is a list of information for Peter and Amy Jones for the current tax year. Peter
and Amy are married and have three children, Aubrynne, Bryson, and Caden. They live at
1846 Joplin Way, Lakeville, MN 55022. Peter is a lawyer working for a Native American
law firm. Amy works part-time in a genetic research lab. The Jones’ Social Security numbers
and ages are as follows:
Peter 215-60-1989 32
Amy 301-60-2828 28
Aubrynne 713-84-5555 5
Bryson 714-87-2222 3
Caden 714-89-1684 1
Peter’s salary $70,000
Amy’s salary 32,000
Interest income on municipal bonds 2,400
Interest income on certificate of deposit (Universal Savings) 3,100
Dividends on GM stock 1,600
Eyeglasses and exam for Aubrynne $ 600
Orthodontic work for Bryson to correct a congenital defect 2,500
Medical insurance premiums 1,800
Withholding for state income taxes 7,200
Withholding for federal income taxes 16,000
State income taxes paid with last year’s tax return
(paid when the return was filed in the current year) 500
Property taxes on home 1,100
Property taxes on automobile 300
Interest on home 9,700
Interest on credit cards 200
Cash contribution to church 3,900
In addition to the above, on September 17, Peter and Amy donate some Beta Trader, Inc.
stock to Lakeville Community College. Beta Trader, Inc. is publicly traded. The FMV of
the stock on the date of the contribution is $700. Peter and Amy had purchased the stock
on November 7, 2003 for $300.
Compute Peter and Amy’s income tax liability for the current year using Form 1040,
Schedules A and B, and Form 8283, if necessary.
Explanation / Answer
1040 line 7 102,000, line 8a 3100, line 9a 1600 (line 9b also assuming qualified) line 22 106700, line 37 106700, line 38 106700, line 40 23400 - itemized deductions line 41 83300, line 42 18250 - 5 exemptions x3650, line 43 65050 line 44 8916 - tax from table *note if dividends are qualified this tax would be $240 less, since they are in the 15% tax bracket, and the tax on qualified dividends for them would be 0%; there is a worksheet for this called something like qualified dividend and capital gain worksheet and problem doesnt say these are qualified or to use the worksheet line 46 8916, line 51 3000 child tax credit - 3 children at 1000 each, line 54 3000 line 55 5916 - tax liability shedule a, line 4 0 medical expenses are 0 because they are less than 7.5% of AGI line 5 7700, line 6 1100, line 8 300, line 9 9100, line 10 9700, line 15 9700, line 16 3900, line 17 700, line 19 4600, line 29 23400 schedule b part 1, line 1 3100, line 2 3100, line 4 3100 part 2, line 5 1600, line 6 1600, - complet part 3 - no, no form 8283 only need to fill in part I - can take fmv as deduction also note municipal bond interest is not taxable. withholding for federal income taxaes is not deductible, and neither is interest on credit cards.
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