Question

Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children, Charlene, age 17, and Jordan, age 18. Charlene’s Social Security number is 123-45-6788, and Jordan’s Social Security number is 123-45-6787. In 2018, Martin and Michele had the following transactions: 1. Martin received $120,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA taxes were as follows: $7,049 ($113,700 × 6.2%) for Social Security and $1,740 ($120,000 × 1.45%) for Medicare. Martin worked in Mexico from January 1, 2017, until February 15, 2018. His $120,000 salary for 2018 includes $18,000 he earned for January and one-half of February 2018 while working in Mexico. 2. Albert’s mother passed away and he received a parcel of Land worth $100,000. 3. Martin and Michele received $1,400 interest on Montgomery County (Virginia) school bonds. 4. Martin received $2,300 interest from a Bahamian bank account. 5. Martin received $6,000 of a dividend on Ford Company stock that he has owned for over 3 years. 6. Michele received 50 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $2,500 at the time Michele received them, and she did not have the option of receiving cash. 7. Martin and Michele received a $1,500 refund on their 2017 Virginia income taxes. Their itemized deductions in 2017 totaled $15,000. 8. Martin paid $8,600 alimony to his former wife, Rose T. Morgan (Social Security number 123-45- 6786). The divorce was finalized in 2015. 9. Martin and Michele kept the receipts for their sales taxes paid of $1,100. 10. Martin and Michele’s itemized deductions were as follows:  State income tax paid and withheld totaled $5,100.  Real estate taxes on their principal residence were $5,800.  Mortgage interest on their principal residence was $5,500.  Cash contributions to the church totaled $5,800.  Medical Expenses related to Doctors, etc. of $5,000  Job related unreimbursed expenses of $2,500 related to travel. Compute the Alberts’s net federal tax payable (or refund due) for 2017 and 2018. Use the 1040 and applicable other forms that you need to file a return with the IRS for 2017 and 2018.

Answer 1