Tax Stuff Essay

1191 words - 5 pages

1. Filing Status:
Married filing jointly
2. Self-Employment Income
Income from consulting practice 12,000
Expenses:
Travel 850
Postage 600
Office supplies 500
Client lunches (780 x 50%) 390
Depreciation – old computer
using half-year convention:
(1,800 x 11.52% x ½ ) 104
Depreciation – new laptop
using mid-quarter convention:
(1,200 x 5%) 60 2,504
Self-employment income 9,496
3. Self-Employment Tax and Deductible Portion of Self-Employment Tax
Net earnings from self-employment = 9,496 x .9235 = 8,770
Earning subject to social security portion: 110,100 - 97,350 = 12,750 > 8,770 therefore all of the net earnings from ...view middle of the document...

Gross rental income| $18,000|
Rental expenses:Mortgage interest = (84/91) × $4,000 = $3,692Property taxes= (84/91) × $6,200 = $5,723Insurance = (84/91) × $1,400 = $1,292Maintenance = (84/91) × $1,000 = $923Depreciation = (365,000 x 3.636%) x (84/91) = $12,251Total rental expenses| (23,881)|
Net rental loss| ($5,881)|
||
Property taxes deducted from AGI = (7/91) x $6,200 = $477||
Mortgage interest deducted from AGI = $0 (not considered a personal residence)||
6. AGI:
Susie’s salary 30,000
Hugh’s award 350
Hugh’s salary 22,000
Hugh’s commissions 75,000
Self-employment earnings 9,496
Gain on sale of computer (ordinary income) 186
Interest from corporate bonds 3,100
Interest from checking account 330
Qualified dividends 3,500
Long-term capital gain (see below) 3,200
Income from limited partnership (passive income) 1,200
Rental loss (passive) deductible against passive income (1,200)
Less: deductible portion of self-employment tax (671)
AGI before additional rental loss 146,491
Additional deductible rental loss (see below) (1,754)
AGI 144,737
Long-term Capital Gain:
Description|ST|LT||
||28%|25%|15%||
Tripeca Company stock |(1,900)|||||
Jacob Corporation stock ||||900||
Antique painting||4,200||||
|(1,900)|4,200||900||
|| (1,900)|-|- ||
Total|0|$2,300||$900|$3,200|
Additional Deductible Rental Loss:
Rental loss |(5,881) ||
Loss deductible against passive income|(1,200)||
Remaining rental loss|(4,681)||
|||
Maximum deduction against non-passive income available before phase-out|25,000||
Phase-out of maximum deduction|23,246| [(146,491 – 100,000) x .50]|
Maximum deduction against non-passive income available in current year|1,754| (25,000 – 23,246)|
Remaining rental loss in 2012|4,681| (5,881 – 1,200) see above|
Remaining rental loss deductible in 2012|1,754| (Lesser of 1,754 or 4,681 )|
Passive loss carryforward|2,927| [5,881 – (1,200 + 1,754)]|
|||
|
7. Itemized Deductions:
Medical:
Dentist bills 2,450
Hospital and doctor bills (11,000 – 3,500) 7,500
Physical therapy 1,075
Prescription drugs 245
Eye doctor visits 350
Eyeglasses 625
Total medical expenses 12,245
Minus: 7.5% of AGI (144,737 x 7.5%) (10,855)
Deductible medical expenses 1,390
Interest:
Mortgage interest on residence 6,900
Mortgage interest on home equity loan 2,500
Points ($1,200 / 15 yrs x 3/12) 20
Investment interest [(limited to net investment
income = (3,100 interest + 330 ineterset 225 deductible
investment expense* = 3,205) 3,205
12,625
* Deductible investment expense is the lesser of investment interest expense and deductible
miscellaneous itemized deductions subject to the 2% AGI floor (see amount calculated on...

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