Question

Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1973, and her Social Security number is 123-45-6785. She wants to contribute $3 to the Presidential Election Campaign Fund.

The following information is shown on Beth's Wage and Tax Statement (Form W–2) for 2019.

Line	Description	Amount
1	Wages, tips, other compensation	$65,000.00
2	Federal income tax withheld	9,500.00
3	Social Security wages	65,000.00
4	Social Security tax withheld	4,030.00
5	Medicare wages and tips	65,000.00
6	Medicare tax withheld	942.50
15	State	Arizona
16	State wages, tips, etc.	65,000.00
17	State income tax withheld	1,954.00

During the year, Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth's dividend payments on a Form 1099–DIV.

Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2019. On her 2018 Federal income tax return, she used the standard deduction.

Fees earned from her part-time tax practice in 2019 totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.

On February 8, 2019, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, 2019, Beth sold the stock for $14 a share.

Beth bought a used sport utility vehicle for $6,000 on June 5, 2019. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, 2019, she sold the vehicle to a friend for $6,500.

On January 2, 2019, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2019, for $55 a share.

During the year, Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenses in connection with her software development business.

Cost of personal computer	$7,000
Cost of printer	2,000
Furniture	3,000
Supplies	650
Fee paid to computer consultant	3,500

Beth elected to expense the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15, 2019, and used 100% in her business.

Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the convention. The $1,420 included $200 for the cost of meals.

During the year, Beth paid $300 for prescription medicines and $2,875 for doctor interest to credit card bills and hospital bills. Medical insurance premiums were paid for her by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage (Valley National Bank) was $3,845, and interest to credit card companies was $320. Beth contributed $2,080 to various qualifying charities during the year. Professional dues and subscriptions totaled $350.

Beth paid estimated taxes of $1,000. Beth does not own or use any virtual currency.

Required:

Compute the net tax payable or refund due for Beth R. Jordan for 2019.

Answer 1

Computation of net tax payable or refund due for Beth R. Jordan:

	Amount	Amount
Salary		65,000
Interest Income - Arizona Federal Savings		1,300
Interest Income - State Bank		400
Dividend Income:
Blue Corporation	800
Green Corporation	750
Orange Corporation	650	2,200
State Income refund		1,100
Business Income:
Fees Earned	3,800
Royalties	16,000	19,800
Short term Capital Gain:
Gray Stock(a)	(1,800)
Sport utility vehicle(b)	500
Blue Stock (c)	2,500	1,200
Total Gross Income		91,000
Business Expenses:
Tax practice processing fee	(600)
Software writing expense	(16,150)	(16,750)
Self-employment tax deduction		(216)
Adjusting Gross Income		74,034
Itemized deductions:
Property Taxes	1,766
Sale Taxes	1,954
Interest on Home Mortgage	3,845
Charitable Contribution	2,080
Miscellaneous Deduction	189	9,834
Personal Exemptions ($3,900)		3,900
Taxable Income		60,300
Tax on dividend Income ($2,200 * 15%)		330
Tax Due(d)		10,454
Self-Employment tax		431
Total Tax Due		11,215
Taxes paid through withholding ($10,500 + $1,000)		11,500
Tax Liability (or Refund)		(285)

WORKING NOTES:-

a)Gray Stock = (500 * $17.60) - (500 * $14) = ($1,800)

b)Sport Utility Vehicle = ($6,500 - $6,000) = $500

c)Blue Stock = (55 * 100) - (100 * 30) = $2,500

d)Tax Due:

($60,300 - $2,200) = $58,100

($58,100 - $36,250) * 0.25 + $4,991.25 = $10,454