Question

Bob and Cathy, husband and wife, both age 40, have the following transactions during 2019:

-They sold their old residence on January 28, 2019 for $380,000. The basis of the their old residence, purchased in 2008, was $70,000. The selling expenses were $20,000. On May 17, 2018 they purchased and moved into another residence costing $150,000.

-On April 28, 2019, they sold for $8,000 stock that Cathy had received as a gift from her mother, who had purchased the stock for $10,000 in 2013. Her mother gave Cathy the stock on November 15, 2017 when the fair market value was $9,400.

-On May 24, 2019, Bob sold for $21,000 stock inherited from his father. His father died on June 14, 2017, when the fair market value of the stock was $9,000. Bob’s father paid $7,000 for the stock in 2011.

-On August 11, 2019, they sold a personal automobile for $8,000; basis of the automobile was $20,000 and it was purchased in 2015.

Bob had a salary of $40,000 and Cathy had salary of $28,000. They have no children. They paid state income taxes of $6,200, sales tax of $400, federal income taxes of $15,000, and property taxes of $1,700. In addition, they contributed $16,000 to their church and paid $4,000 interest on their mortgage.

Compute Bob and Cathy’s taxable income for 2019.

Answer 1

working

Capital gain computation of principal residence
Sales consideration	380000
Selling expense	-20000
Net consideration	360000
Adjusted basis	70000
Gain on sale	290000

Taxable income of Bob and Cathy for 2019 (assuming MFJ)

	Particulars	Bob	Cathy	Total
	Salary	40000	28000
	Gain on sale of residence	145000	145000
	Loss on sale of gifted stock		(1,400.00)
	Gain on sale of inherited stock	12,000.00
	Gross income without gain on sale of automobile	$197,000	$171,600
	Total			$368,600
Less	loss on sale of automobile (loss on personal asset not allowed)			-
	Gross income			$368,600
Less	Higher of Standard deduction (MFJ)of $24,400 or Itemized deduction Itemized deduction - 6200 + 1700 +16000 +4000 = $27,900			27900
Less	Homeowners exclusion ( upto $500,000)			290000
	Taxable income			$50,700