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 2016, Martin and Michele had the following transactions:

a. 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, 2015, until February 15, 2016. His $120,000 salary for 2016 includes $18,000 he earned for January and one-half of February 2016 while working in Mexico.

b. Martin and Michele received $800 in qualified dividends on Green, Inc. stock and $400 interest on Montgomery County (Virginia) school bonds.

c. Martin received $2,300 interest from a Bahamian bank account.

d. 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.

e. Martin and Michele received a $1,200 refund on their 2015 Virginia income taxes. Their itemized deductions in 2015 totaled $14,000.

f. Martin paid $6,600 alimony to his former wife, Rose T. Morgan (Social Security number 123-45-6786).

g. Martin and Michele kept the receipts for their sales taxes paid of $1,100. h. 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 $3,700. • Mortgage interest on their principal residence was $2,500. • Cash contributions to the church totaled $2,800.

Part 1—Tax Computation Compute the Alberts’s net tax payable (or refund due) for 2017.

Answer 1

Calculation of Net Tax Payable for 2017

	Gross Income	Amount	Amount
	Salary		$120,000
a.	Less: Foreign income earned exclusion(since Martin meets 330 days criteria, he is eligible for foreign income exclusion for 46 days.)		-12,502
d.	Dividends($800 income is included, however $400 interest on Montgomery County (Virginia) school bonds is excluded)		$800
c.	Interest on Bahmian bank account included		2,300
e.	Interest on County M		0
b.	Sales tax refurnd		1,200
	Gross Income		$111,798
	Deductions for Adjusted Income		($6,600)
	Alimony Paid		$105,198
	Adjusted Gross income
	Itemised Deductions
f.	Itemised or standard deductions (whichever is higher)	14100	($14,100)
g.	Personal Dependency exemptions		($15,800)
	Taxable Income		$75,298
h	Tax		$10,457
	Less Federal Income Tax witheld		($10,750)
	Net Tax Payable (or refund due ) for 2017		($293)