Question

Glen and Diane Okumura (both age 48) are married, file a joint return, and live at 39 Kaloa Street, Honolulu, HI 96815. Glen’s Social Security number is 111-11-1111, and Diane’s is 123-45-6789. The Okumuras have two dependent children, Amy (age 15) and John (age 9). Amy’s Social Security number is 123-45-6788, and John’s Social Security number is 123-45-6787. Glen works for the Hawaii Public Works Department, and Diane works in a retail dress shop. Glen’s employer provided medical insurance to Glen and his family during 2019. The Okumuras had the following transactions during 2019: a. Glen earned $57,000 in wages and had Federal income tax withholding of $2,000. b. Diane earned $38,000 in wages from the dress shop and had Federal income tax withholding of $1,000. The Okumuras sold a small apartment building for $89,980 on November 15, 2019. The building was acquired in October 2011 for $200,000; cost recovery was $66,820. d. The Okumuras received $3,000 in qualified dividends on various domestic cor- poration stocks they own. e. The Okumuras sold stock on November 5 for a $23,000 long-term capital gain and other stock on December 10 at a $2,000 short-term capital loss. f. The Okumuras had the following itemized deductions: $14,790 unreimbursed medical expenses, $10,500 personal use real property taxes, $8,000 qualified res- idence interest, $1,500 of Glen’s unreimbursed employee business expenses, $535 of investment-related expenses, $2,700 of state income taxes paid, and $1,061 of sales taxes from the sales tax table. g. The Okumuras spent $3,000 on qualifying child care expenses during the year. Compute the Okumuras’ 2019 net tax payable or refund due. Also write a letter to the Okumuras, describing how the sale of the apartment building affects their return.

Answer 1

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