Question

4. Apple and Bob Johnson (both age 45) are married taxpayers who file a joint return. They have a son, John, age 10. During 2018, they had the following receipts:

1	Salary (Apple’s salary: $85000, Bob’s:$72,000)	$157,000
2.	Interest Income City of Normal school bonds       $1,000 Ford Motor Company bonds         1,200 PNC Bank certificate of deposit       600	2,800
3.	Annual gift from parents	26,000
4.	Lottery winnings	1,000
5.	Short-term capital loss (from stock investment)	( 5,000)
6.	Long-term capital gain (from stock investment)	1,000
6.	Federal income tax refund from year 2017 return	2,400

During 2018, they also have the following payments/contributions:

1.	Medical expenses Medical insurance premiums                        $4,500 Hospital expenses for John                             4,500	9,000
2.	Property taxes	5,000
3.	Contribution to IRA	10,000
4.	Qualified interest on home mortgage	5,000
5.	Utilities (water, gas, and electricity)	4,500
6.	Car insurance	1,200
7.	State income tax paid	13,000
8.	Interest on car loan	1,500
9.	Cash contribution to church	3,300
10.	Bob paid the alimony to his ex-wife	8,000

Please help Johnsons to calculate the following items on their 2019 Form 1040

1. Their AGI
2. Their taxable
3. and the following itemized deductions:

1.	Allowable deduction on medical and dental expenses:
2.	Allowable deduction on taxes they paid
3.	Allowable deduction on Interest paid
4.	Allowable deduction on Gift to Charity
5.	Allowable miscellaneous deductions

Answer 1

Required A

Salary
Apple Salary	$       85,000
Bob Salary	$       72,000	$ 1,57,000
Schedule B Interest Income
City of Normal school bonds	$         1,000
Ford Motor Company bonds	$         1,200
PNC Bank certificate of deposit	$             600	$       2,800
Schedule D Capital gains
Short-term capital loss	$        -5,000
Long-term capital gain	$         1,000
Net capital loss	$        -4,000
Carry forward indefinitely	$         1,000	$     -3,000
Other Income
Lottery Winnings	$         1,000
Federal Income tax refund	$         2,400	$       3,400
Gross Income		$ 1,60,200
Less Adjustments
Contribution to IRA	$     -10,000
Alimony to his ex-wife	$        -8,000	$   -18,000
Adjusted Gross Income		$ 1,42,200

Required B

Calculation of itemized deduction
Medical and Dental Expenses
Medical insurance premiums	$         4,500
Hospital expenses for John	$         4,500	$       9,000
Taxes Paid
Property Taxes	$         5,000
State Income tax paid	$       13,000	$     18,000
Interest paid
Qualified interest on home mortgage	$         5,000	$       5,000
Charity
Cash Contribution to church	$         3,300	$       3,300
Other itemized deduction		$              -
Total Itemized Deduction		$     35,300

Required C

Taxable Income = AGI - Itemized Deduction = $142,200 - $35,300 = $106,900

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