Question

In: Accounting

Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The...

Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2018, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,400. Federal tax withholding of $21,000. Alimony payments to John’s former wife of $10,000 (divorced in 2014). Child support payments for John’s child with his former wife of $4,100. $12,200 of real property taxes. Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer. $3,600 to Kid Care day care center for Samantha’s care while John and Sandy worked. $14,000 interest on their home mortgage ($400,000 acquisition debt). $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car. $15,000 cash charitable contributions to qualified charities. Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000. What is the Fergusons' 2018 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable? (Round your intermediate computations to the nearest whole dollar amount.)

Solutions

Expert Solution

Description

Amount

Explanation

Gross income:

Salary

182000

(152500+29500)

Self-employment revenues

4500

Dividends

900

State income tax refund

225

(1) Gross income

187625

For AGI deductions:

Self-employment expenses other than travel expenses

1000

John’s self employment related travel expenses

$370 airfare, taxi fares $180, Meals$40 (80 ×50%)

John’s conference fees

Employer portion of self-employment taxes

247

$430 ×57.51% = $247

Alimony

10250

(2) Total for AGI deductions

11497

(3) AGI

176128

(1) - (2)

Itemized deductions:

State income taxes

4525

Real property taxes

12250

Home mortgage interest expense

14500

Home equity loan interest expense

3075

Charitable contributions cash

15250

Charitable contributions property

450

Lesser of fair market value or basis

(4) Total itemized deductions

50050

(5) Total from AGI deductions

50050

Standard deduction for MFJ is $24000 so the Fergusons deduct itemized deductions

Taxable income

126078

(3) – (5)

(6) Tax on income other than qualified dividends

19418.16

$126078 – 900 = $125178.Tax = $3,792.90. from MFJ tax rate schedule $8907 + 2,052.90 [22% ×(125178 – 77400)]

(7) Tax on qualified dividends

0

$900 ×0%; all $800 would have been taxed at 15% if it had been ordinary income.

(8) Total Federal income tax

19418.16

(6) + (7)

(9) Self Employment tax

430

(10) Alternative Minimum tax

19418.16

(11) Total taxes

39266.32

(8) + (9) +(10)

(12) Child and dependent care credit

600

(13) Child tax credit

2000

One qualifying child

(14) Federal tax withholding

21000

Tax payable (refund)

15666.32

(11) – (12) – (13)- (14)

Description

Amount

Explanation

(1) Self-employment revenue

4500

Expenses:

Day to day expenses

1000

Travel expenses

Education expenses

Conference fee

(2) Total self-employment expenses

1000

Net self-employment income

3500

(1) – (2)

Tax on self-employment income = $3500 × 92.35% × 13.3% = $430

Description

Amount

Explanation

(1) Child and dependent care expenditures

3600

(2) Limit on qualifying expenditures for one dependent

3000

(3) Ferguson’s earned income

185500

182000+3500

(4) Expenditures eligible for credit

3000

Least of (1), (2), and (3)

(5) Credit percentage rate

20%

Child and dependent care credit

600

Description

Amount

Explanation

(1) Taxable income

126078

(2) Exemptions

50050

(3) AMTI before other adjustments

176128

(1) + (2)

Plus adjustments:

(4) Real estate property taxes

12250

(5) State income taxes

4525

(6) Home-equity interest expense (loan proceeds used to purchase car)

3075

Minus adjustments:

(7) State income tax refund

(225)

(8) Alternative minimum taxable income

195753

(3) + (4) + (5) + (6)+(7)

(9) AMT Exemption

109400

MFJ 2011 exemption amount

AMT base

86353

(8) – (9), limited to $0

(10) TMT

24178.84

(9) x 28%

(11) Regular tax

19418.16

AMT

19418.16

(10) > (11)


Related Solutions

Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The...
Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $153,100, and Sandy worked part-time as a receptionist for a law firm earning a salary of $30,100. John also does some Web design work on...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design...
Comprehensive Problem 19-58 (LO 19-1, LO 19-2, LO 19-3, LO 19-4, LO 19-5) Rex and Felix...
Comprehensive Problem 19-58 (LO 19-1, LO 19-2, LO 19-3, LO 19-4, LO 19-5) Rex and Felix are the sole shareholders of the Dogs and Cats Corporation (DCC). After several years of operations using the accrual method, they decided to liquidate the corporation and operate the business as a partnership. Rex and Felix hired a lawyer to draw up the legal papers to dissolve the corporation, but they need some tax advice from you, their trusted accountant. They are hoping you...
Required information Foundational [LO 2-1, LO 2-2, LO 2-3, LO 2-4, LO 2-6, LO 2-7] [The...
Required information Foundational [LO 2-1, LO 2-2, LO 2-3, LO 2-4, LO 2-6, LO 2-7] [The following information applies to the questions displayed below.] Martinez Company’s relevant range of production is 8,500 units to 13,500 units. When it produces and sells 11,000 units, its unit costs are as follows: Amount Per Unit   Direct materials $ 6.10   Direct labor $ 3.60   Variable manufacturing overhead $ 1.40   Fixed manufacturing overhead $ 4.10   Fixed selling expense $ 3.10   Fixed administrative expense $ 2.10...
Required information PA4-4 Identifying and Preparing Adjusting Journal Entries [LO 4-1, LO 4-2, LO 4-3, LO...
Required information PA4-4 Identifying and Preparing Adjusting Journal Entries [LO 4-1, LO 4-2, LO 4-3, LO 4-6] [The following information applies to the questions displayed below.] Val’s Hair Emporium operates a hair salon. Its unadjusted trial balance as of December 31, 2018, follows, along with information about selected accounts. Account Names Debit Credit Further Information Cash $ 2,800 As reported on December 31 bank statement. Supplies 3,300 Based on count, only $800 of supplies still exist. Prepaid Rent 3,000 This...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT