Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next...

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $104,000, contribute $8,450 to charity, and pay $3,400 in state income taxes.

Required:

Estimate Trevor’s taxable income for year 1 and year 2 using the 2019 amounts for the standard deduction for both years.
Now assume that Trevor combines his anticipated charitable contributions for the next two years and makes the combined contribution in December of year 1. Estimate Trevor’s taxable income for each of the next two years using the 2019 amounts for the standard deduction.
Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $3,200 and $28,000, respectively, each year. Estimate Trevor’s taxable income for each of the next two years (year 1 and year 2) using the 2019 amounts for the standard deduction and also assuming Trevor makes the charitable contribution of $8,450 and state tax payments of $3,400 in each year.
Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $3,200 and $28,000, respectively, each year. Assume that Trevor makes the charitable contribution for year 2 and pays the real estate taxes for year 2 in December of year 1. Estimate Trevor’s taxable income for year 1 and year 2 using the 2019 amounts for the standard deduction.

Solutions

Expert Solution

Answer:

Note:-Standard deduction is $12,200 and itemized deduction would be $11,850 (i.e. $8,450+3,400), so he should choose standard deduction.

Note: Combing the charitable contributions into one year will make itemized deductions for year 1 $20,300 (i.e. 8,450+8,450+3,400) so for year 1 claim itemized deduction and year two standard deduction.

Note: Itemized deduction of $43,050 (i.e. 28,000+3,200+8,450+3,400) vs standard deduction of $12,200 he will choose the itemized deduction

Note:- Trevor will be using itemized deductions in the both the years

Year 1 itemized deductions= $8,450+8,450+3,400+3,200+3,200+28,000= $54,700

Year 2 itemized deductions= $3,400+28,000= $31,400

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next...

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $80,000, contribute $8,000 to charity, and pay $2,800 in state income taxes. A. Assume that Trevor combines his anticipated charitable contributions for the next two years and makes the combined contribution in December of year 1. Estimate Trevor’s taxable income for each of the next two years using the 2018 amounts...

Tim is a single, cash-method taxpayer with an AGI of $50,000. InApril of this year,...

Tim is a single, cash-method taxpayer with an AGI of $50,000. In April of this year, Tim paid $900 with his state income tax return for the previous year. During the year, Tim had $4,600 of state income tax and $16,500 of federal income tax withheld from his salary. In addition, Tim made estimated payments of $1,100 and $1,700 of state and federal income taxes, respectively. Finally, Tim expects to receive a refund of $420 for state income taxes when...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $15,000 bill from her accountant for consulting services related to her small business. Reese can pay the $15,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after-tax rate of return of 9 percent on her...

1. Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In...

1. Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $21,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny’s marginal tax rate is 32 percent this year and next year, and that he can earn an after-tax rate of return of 6 percent on his investments. What is the net benefit of collecting the bill in December? 2.Jonah...

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $21,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Hank sends...

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $75,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $75,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 10 percent on her investments. a. What is...

Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer...

Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer and is trying to evaluate the tax consequences of three different lease arrangements. Under lease 1, the building rents for $700 per month, payable on the first of the next month, and the tenant must make a $700 security deposit that is refunded at the end of the lease. Under lease 2, the building rents for $7,700 per year, payable at the time the...

José, a cash method taxpayer, is a partner in J&T Accounting Services, a calendar year partnership....

José, a cash method taxpayer, is a partner in J&T Accounting Services, a calendar year partnership. Under the partnership agreement, José is to receive 20% of the partnership’s profits or losses. Each partner is allowed to withdraw $10,000 each month for his or her living expenses. José withdrew $120,000 during the year as his monthly draw in 2019. However, in December, the partnership was short on cash and José was required to invest an additional $10,000 in the partnership. In...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $35,000 bill from her accountant for consulting services related to her small business. Reese can pay the $35,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent next year, and that she can earn an after-tax rate of return of 10 percent on her...

Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer...

Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer and is trying to evaluate the tax consequences of three different lease arrangements. Under lease 1, the building rents for $680 per month, payable on the first of the next month, and the tenant must make a $680 security deposit that is refunded at the end of the lease. Under lease 2, the building rents for $7,480 per year, payable at the time the...

Subjects