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Question: Shauna Coleman is single. She is employed


Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD). Shauna wanted to determine her taxable income. She correctly calculated her AGI. However, she wasn’t sure how to compute the rest of her taxable income. She provided the following information with hopes that you could use it to determine her taxable income.

a. Shauna paid $4,680 for medical expenses for care from a broken ankle. Also, Shauna’s boyfriend, Blake, drove Shauna (in her car) a total of 115 miles to the doctor’s office so she could receive care for her broken ankle.
b. Shauna paid a total of $3,400 in health insurance premiums during the year (not through an exchange). SD did not reimburse any of this expense. Besides the health insurance premiums and the medical expenses for her broken ankle, Shauna had Lasik eye surgery last year and she paid $3,000 for the surgery (she received no insurance reimbursement). She also incurred $450 of other medical expenses for the year.
c. SD withheld $1,800 of state income tax, $7,495 of Social Security tax, and $14,500 of federal income tax from Shauna’s paychecks throughout the year.
d. In 2016, Shauna was due a refund of $250 for overpaying her 2015 state taxes. On her 2015 state tax return that she filed in April of 2016, she applied the overpayment towards her 2016 state tax liability. She estimated that her state tax liability for 2016 will be $2,300.
e. Shauna paid $3,200 of property taxes on her personal residence. She also paid $500 to the developer of her subdivision, because he had to replace the sidewalk in certain areas of the subdivision.
f. Shauna paid a $200 property tax based on the state’s estimate of the value of her car.
g. Shauna has a home mortgage loan in the amount of $220,000 that she secured when she purchased the home. The home is worth about $400,000. Shauna paid interest of $12,300 in interest on the loan this year.
h. Shauna made several charitable contributions throughout the year. She contributed stock in ZYX Corp. to the Red Cross. On the date of the contribution, the FMV of the donated shares was $1,000 and her basis in the shares was $400. Shauna originally bought the ZYX Corp. stock in 2008. Shauna also contributed $300 cash to State University and religious artifacts she has held for several years to her church. The artifacts were valued at $500 and Shauna’s basis in the items was $300. Shauna had every reason to believe the church would keep them on display indefinitely. Shauna also drove 200 miles doing church-related errands for her minister. Finally, Shauna contributed $1,200 of services to her church last year.
i. Shauna’s car was totaled in a wreck in January. The car was worth $14,000 and her cost basis in the car was $16,000. The car was a complete loss. Shauna received $2,000 in insurance reimbursements for the loss.
j. Shauna paid $300 for architectural design publications, $100 for continuing education courses to keep her up to date on the latest design technology, and $200 for professional dues to maintain her status in a professional designer’s organization.
k. Shauna paid $250 in investment advisory fees and another $150 to have her tax return prepared (that is, she paid $150 in 2016 to have her 2015 tax return prepared).
l. Shauna is involved in horse racing as a hobby. During the year, she won $2,500 in prize money and incurred $10,000 in expenses. She has never had a profitable year with her horse racing activities, so she acknowledges that this is a hobby for federal income tax purposes.
m. Shauna sustained $2,000 in gambling losses over the year (mostly horse-racing bets) and only had $200 in winnings.


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> Identify which itemized deductions are subject to floor limitations, ceiling limitations, or some combination of these limits.

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> Frank paid $3,700 in fees for an accountant to tabulate business information (Frank operates as a self-employed contractor and files a Schedule C). The accountant also spent time tabulating Frank’s income from his investments and determining Frank’s pers

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> Explain why an employee should be concerned about whether his employer reimburses business expenses using an “accountable” plan?

> How might the reimbursement of a portion of an employee expense influence the deductibility of the expense for the employee?

> Otto and Fiona are negotiating the terms of their divorce. Otto has agreed to transfer property to Fiona over the next two years, but he has reserved the right to make cash payments in lieu of property transfers. Will tax considerations play a role in Ot

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> Read the following letter and help Shady Slim with his tax situation. Please assume that gross income is $172,900 (which consists only of salary) for purposes of this problem.

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> What amounts are included in gross income for the following taxpayers? Explain your answers. a. Janus sued Tiny Toys for personal injuries from swallowing a toy. Janus was paid $30,000 for medical costs and $250,000 for punitive damages. b. Carl was inju

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> Grady is a member of a large family and received the following payments this year. For each payment, determine whether the payment constitutes realized income and determine the amount of each payment Grady must include in his gross income. a. A gift of $

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> Nikki works for the Shine Company, a retailer of upscale jewelry. How much taxable income does Nikki recognize under the following scenarios? a. Nikki buys a diamond ring from Shine Company for $10,000 (normal sales price, $14,000; Shine Company’s gross

> Grady received $8,200 of Social Security benefits this year. Grady also reported salary and interest income this year. What amount of the benefits must Grady include in his gross income under the following two independent situations? a. Grady files singl

> For each of the following independent situations, indicate the amount the taxpayer must include in gross income and explain your answer: a. Phil won $500 in the scratch-off state lottery. There is no state income tax. b. Ted won a compact car worth $17,0

> Todd and Margo are seeking a divorce and no longer live together. Margo has offered to pay Todd $42,000 per year for five years if Margo receives sole title to the art collection. This collection cost them $100,000, but is now worth $360,000. All other p

> Lanny and Shirley are recently divorced and do not live together. Shirley has custody of their child, Art, and Lanny pays Shirley $22,000 per year. All property was divided equally. a. How much should Shirley include in income if Lanny’s payments are mad

> George purchased a life annuity to provide him monthly payments for as long as he lives. Based on IRS tables, George’s life expectancy is 100 months. Is George able to recover his cost of the annuity if he dies before he receives 100 monthly payments? Ex

> Gramps purchased a joint survivor annuity that pays $500 monthly over his remaining life and that of his wife, Gram. Gramps is 70 years old and Gram is 65 years old. Gramps paid $97,020 for the contract. How much income will Gramps recognize on the first

> Larry purchased an annuity from an insurance company that promises to pay him $1,500 per month for the rest of his life. Larry paid $170,820 for the annuity. Larry is in good health, and he is 72 years old. Larry received the first annuity payment of $1,

> Anne purchased an annuity from an insurance company that promised to pay her $20,000 per year for the next 10 years. Anne paid $145,000 for the annuity, and in exchange she will receive $200,000 over the term of the annuity. a. How much of the first $20

> Janet is a cash-basis calendar-year taxpayer. She received a check for services provided in the mail during the last week of December. However, rather than cash the check, Janet decided to wait until the following January because she believes that her de

> Describe in general how the cash method of accounting differs from the accrual method.

> This year Jorge received a refund of property taxes that he deducted on his tax return last year. Jorge is not sure whether he should include the refund in his gross income. What would you tell him?

> Compare how the return of capital principle applies when (1) a taxpayer sells an asset and collects the sale proceeds all immediately and (2) a taxpayer sells an asset and collects the sale proceeds over several periods (installment sales). If Congress w

> What issue precipitated the return of capital principle? Explain.

> Andre constructs and installs cabinets in homes. Blair sells and installs carpet in apartments. Andre and Blair worked out an arrangement whereby Andre installed cabinets in Blair’s home and Blair installed carpet in Andre’s home. Neither Andre nor Blair

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> Conceptually, when taxpayers receive annuity payments, how do they determine the amount of the payment they must include in gross income?

> Describe the concept of realization for tax purposes.

> Based on the definition of gross income in §61 and related regulations, what is the general presumption regarding the taxability of income realized?

> Tom was just hired by Acme Corporation and has decided to purchase disability insurance. This insurance promises to pay him weekly benefits to replace his salary should he be unable to work because of disability. Disability insurance is also available th

> Jim was injured in an accident and his surgeon botched the medical procedure. Jim recovered $5,000 from the doctors for pain and suffering and $2,000 for emotional distress. Determine the taxability of these payments and briefly explain to Jim the appare

> How are state-sponsored 529 educational savings plans taxed if investment returns are used for educational purposes? Are the returns taxed differently if they are not ultimately used to pay for education costs?

> Describe the kinds of insurance premiums an employer can pay on behalf of an employee without triggering includible compensation to the employee.

> What are some common examples of taxable and tax-free fringe benefits?

> What are the basic requirements to exclude the gain on the sale of a personal residence?

> When an employer makes a below-market loan to an employee, what are tax consequences to the employer and employee?

4.99

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