Question

Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2016. Alfred and Beulah will file a joint return for 2019. Alfred’s Social Security number is 111-11-1109. Beulah’s Social Security number is 123-45-6780, and she adopted “Old” as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304.

Alfred was divorced from Sarah Old in March 2016. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah’s death, whichever occurs first. Alfred pays Sarah $15,000 in 2019. In addition, in January 2019, Alfred pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years’ income taxes. Sarah’s Social Security number is 123-45-6788.

Alfred’s salary for 2019 is $150,000. He is an executive working for Cherry, Inc. (Federal I.D. No. 98-7654321). As part of his compensation package, Cherry provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2019. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Alfred and Beulah had interest income of $500. They receive a $1,900 refund on their 2018 state income taxes. They itemized deductions on their 2019 Federal income tax return (total of $21,000). Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2019. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all months of 2019 and do not want to contribute to the Presidential Election Campaign.

Compute the Olds’ net tax payable (or refund due) for 2019.

Answer 1

Olds’ net tax payable (or refund due) for 2019.	Amount
Gross Income	1,94,700
Less
Alimony Paid (1250*12)	15,000
share of the marital property (not deductible as property settlment)	-
Adjusted Gross Income	1,79,700
Less -Deduction	24,400
Taxable Income	1,55,300
Tax on Taxable Income	25,883
Less - Tax withheld (24900+7500)	32,400
Net Tax payable (refund)	-6,517

Hence, net amount refundable is $ 6,517.00

WN-1

Gross Income
Salary -Alfred E. Old	150000
Salary-Beulah A. Crane	42,000
group term life insurance -Alfred E. Old	300
interest income	500
refund on their 2018 state (taxable as per rule 111)	1,900
	1,94,700

WN-2

group term life insurance -Alfred E. Old
group term life insurance	2* Annual Salary
	2* 150,000
group term life insurance	3,00,000
Cost per 1000 is 0.1 for amount inexcess of 50000 for 12 month	(300,000-50000)*12months*0.1/1000
group term life insurance	300

WN-3

Deduction
Higher of.....
Itemized Deduction	16,900
Stadard Deduction for 2019 for married filling jointly	24,400
Itemized Deduction
state income taxes withheld-Alfred E. Old	8,000
state income taxes withheld-Beulah A. Crane	2,400
Sales tax	1,400
Property tax	1,450
Total tax deduction available limit to 10000	13,250	10,000
Interest mortg		4,500
Personal Exemption (Not available for 2019)		-
Charitable contribution		2,400
Total Itemized Deduction		16,900

WN-4

Tax on income
Income			Tax Rate	Tax
0-19400	19400-0	19,400	10%	1,940
19401-78950	78950-19400	59,550	12%	7,146
78951-168400	155300-78950	76,350	22%	16,797
				25,883