Question

Read the case on which your Portfolio Project is based and determine all items that will be excluded from gross income. In a MS Excel spreadsheet, list all excluded items in column A. In column B, explain why the item is excluded. You may reference the specific tax law, the text (make sure you include the page number), or a link to another trusted source. A trusted source is either supported by the IRS or academic literature (that includes textbooks) under which tax law for the year 2017 is applicable.

Taxpayer Information

              Name:   John Washington

              Address:   3450 Green St.

                                 Miami, FL 54321

              DOB:   5/5/1960

              Filing Status: Married

              SSN: 434-20-2020

              Occupation: Engineer

              Name: Debra Washington

              Address: 3450 Green St.

                                Miami, FL 54321

              DOB: 7/7/1962

              Filing Status: Married

              SSN: 411-21-4568

              Occupation: Teacher

INCOME INFORMATION:

              Wages and Compensation

The following information is taken from John Washington’s 2017 Form W-2 Wage and Tax Statement:

                                          

Box 1 – Wages, tips, and other compensation	80,000
Box 2 – Federal Withholding	12,500
Box 17 – State Income Tax Withholding	2,000

                            

The following information is taken from Debra Washington’s 2017 Form W-2 Wage and Tax Statement:

                                          

Box 1 – Wages, tips, and other compensation	42,000
Box 2 – Federal Withholding	3,500
Box 17 – State Income Tax Withholding	750

              Interest and Dividends

              John had interest income from a savings account from Everest Bank of $500.00

              Debra had dividend income of $550 from Blue Co. stock.

              Capital Gains

              John had the following stock transactions in 2017:

He sold 1,000 shares of Apex Co. for $ 12,000 on June 7, 2017, which he purchased on April 1, 2017 for 25,000

              Rental Real Estate

The couple owns a rent house which he purchased on July 1, 2014. The income and expenses of the rental real estate unit are as follows:

                             Rental income                                $12,000

                             Property taxes                              $1,500

                             Depreciation                                $1,000

                             Repairs and Maintenance             $750

                             Insurance                                        $2,000

Other Transactions in 2017

1. Debra had educator expenses in 2017 of $450.00

2. John had gambling winnings of $1,000.

3. John was the beneficiary of his mother’s life insurance policy.

His mother died in 2017 and he received $50,000 under this policy.

              4. Debra paid $700 in student loan interest.

Answer 1

Loan interest decuction worksheet:

33	Student loan	Amount	Amount
	Actual interest		700
1	Min actual or 2,500		700
2	Total income	1,43,800
3	Deductions to AGI	450
4	Modified AGI	1,43,350
5	Phase out	1,35,000
6		8,350
7	Divide by 15000	0
8	Amount of phase out		195
	Deduction		505