A. The couple’s filing status should be Married Filing Jointly. A1. Married Filing Jointly would be the most beneficial for this couple because it will allow them to stay at a lower tax bracket and also qualify to take a higher standard deduction and higher deduction on the sale of their home than they would as individuals. The family can claim 5 exemptions: 1. Spouse A can take a personal exemption 2. Spouse B can take a personal exemption 3. The 10 year old is classified as a qualifying child and can be claimed as a dependent because they under 19 years of age and lived with the parents for the full year 4. The high school junior is classified as a qualifying child because he is under 19 years old and although Spouse B …show more content…
A2e. Passive activity is an activity in which an investor can earn profit from an activity in which he/she does not physically participate, including rentals and limited partnerships. In this scenario the couple has one rental property from which they received revenue that can be classified as passive income. The passive income has generated a net loss of $6,200. Since the couple has hired a realty company to manage their rental property then the loss must be carried over to the following year. These losses are reported on Form 8582. The $44,000 profit earned from the sale of the third rental property also needs to be reported but will be taxed as Long Term Capital Gains and will be entered as “Other gains or (losses)” using Form 4797. A3. The Income that will be reported for this couple will include the following: -Spouse B’s $8,000/month for 11 months of income from work because these are taxable wages that are paid to Spouse be for employment. - Spouse A’s partnership share of income is reported because in a partnership the partners are to report their share of their business on their individual return. - Spouse A’s $2,000 W-2 from the city park district is reported because as with spouse B’s wages, this is reported because these are wages paid to them for employment. - Dividends received from Spouse A’s investment into Company E is also included as income since the IRS states that dividends from investments is also taxable. -
In this example ONLY for calculating Property in Capital Accounts/Tax Basis there are (4) partners with a 25% share.
i. The gross income information from Jessie Robinson's W-2 form. TIP: This is the amount from question 7b above.
v. Use the Example_Instructions_1040EZ's tax table on pages 27-35 to find the amount that Jessie Robinson owes. TIP: The Example_Instructions_1040EZ is in your Section_2 folder.
IRC §702(a) emphasizes that partners must report their distributive shares of partnership income. §704(a) says that the partnership agreement determines the partner’s distributive shares of income, gain, loss, deductions, and credits, pursuant to the limitations set forth in §704(b). Such limitations were calculated and phrased in terms of the “tax avoidance test” prior to 1976. This test stated that allocations of income, gain, loss, deductions, or credits would be disregarded if the principal purpose for said allocations was tax avoidance per §704(b)(2). In 1976, a new “substantial economic effect” test was adopted in 1976 to determine the limitations relating to a partner’s distributive share. §702(a)(9) requires an allocation of bottom line income or loss to have economic substance that reflects the actual division of such items when viewed from an economic rather than a tax viewpoint.
From the information that was provided, the income was derived from the business and this gross income is taxable pursuant to Code§1.61-3(a). He is subject to self-employment tax, since the total amount of income that will come through to his personal tax income of half of the self-employment tax liability.
Paul, age 24, and Jessica, age 22, are married and want to file a joint return.
Working under the assumption that Adrian is a cash basis taxpayer, one can refer to Treasury Regulation sec. 1451-1(a), which states that under the cash receipts and disbursements method of accounting, such an amount is includible in gross income when actually or constructively received.
a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above?
On June 1, 2016, exactly three months ago, Marianne and Dory received an audit notice for Wise-Holland’s 2011 tax return because some deductions taken were
Taxable earnings are: Spouse A's income from the partnership and the part time soccer referee job is included. Spouse B's earned income from the job as a controller counts as taxable income. The quarterly dividend from company E also falls under the income heading on the 1040 form. The capital loss is also included under income. The interest from the municipal bond is considered tax exempt for federal standards.
Under Family Code Section 3900, the legislation states that the father and mother of a minor child have an equal responsibility to support their child in the manner suitable to the child’s circumstances as well as the parent’s circumstances and station in life. Family Code 3901(a) followed by Section 3900 that the duty of support of a parent continues to unmarried child who has reached the age of 18 years, is a full-time high school student, and who is not self-supporting, until the time the child
Arlen is required by his divorce agreement to pay alimony of $2,000 a month and child support of $2,000 a month to his ex-wife Jane. What is the tax treatment of these two payments for Arlen and Jane?
A2e. Passive Activity Gains and Losses The passive activity rules apply to Individuals, estates, trusts (other than grantor trusts), personal service corporations, and, closely held corporations. (IRS Publication 925) As defined by the IRS, a passive activity is a business activity in which the investor or business owner has the potential to profit but in which the individual does not materially or physically participate. A material participation in a business activity means that the individual participates on a "regular, continuous, and substantial" basis (as defined by the IRS). (Jean Murray, Passive Activity) The couple had two passive activities, both of which we rental activities. Per the IRS, A rental activity is a passive
The joint liability could cause issues for both parties if there were more tax liabilities or an audit was found in the IRS’s favor. When a joint return is filed personal exemptions are allowed for both spouses and exemptions for dependents can be claimed for all dependents.
Tara may have assumed she was receiving more than what she got because like most people who do math they would multiply how much they make by the amount of time they have worked and will immediately forget about taxes which will differ in states. Hopefully she would not repeat that mistake.