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.

This assignment should be delivered using the MS Excel spreadsheet that lists the excluded items and the supporting information on which your decision is based.

ACT405 – Portfolio Project Case 1

Comprehensive Tax Problem – Option 1

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