Paul Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Paul is Jamie's sole support. Paul's wife died in 2018, and Paul has not remarried. Paul received $320,000 of life insurance proceeds (related to his wife's death) in early 2019 and immediately invested the entire amount as shown below. 52. Тax Com Selling Price Date Dividends/ Item Acquired Cost Date Sold Interest 1,000 shares Blue 01/23/19 $ 14,000 12/03/19 $ 3,500 None 400 shares Magenta 600 shares Orange 01/23/19 23,000 $750 01/23/19 230,000 $2,300 100 shares Brown 06/23/13 2,800 01/23/19 14,000 None Green bonds 01/23/19 23,000 $1,200 Gold money market account 01/23/19 30,000 $600 Paul had $42,000 of taxable graduate assistant earnings from State University and received a $10,000 scholarship. He used $8,000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie's day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. Paul received a statement related to the Green bonds saying that there was $45 of original issue discount amortiza- tion during 2019. Paul maintains the receipts for the sales taxes he paid of $735. Paul lives at 1610 Cherry Lane, Bradenton, FL 34212, and his Social Security number is 111-11-1111. Jamie's Social Security number is 123-45-6789. The university withheld $2,000 of Federal income tax from Paul's salary. Paul is not itemizing his deductions. Part 1–Tax Computation Compute Paul's lowest tax liability for 2019. Part 2-Tax Planning Paul is concerned because the Green bonds were worth only $18,000 at the end of 2019, $5,000 less than he paid for them. He is an inexperienced investor and wants to know if this $5,000 is deductible. The bonds had original issue discount of $2,000 when he purchased them, and he is curious about how that affects his investment in the bonds. The bonds had 20 years left to maturity when he pur- chased them. Draft a brief letter to Paul explaining how to handle these items. Also prepare a memo for Paul's tax file.

Paul Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Paul is Jamie's sole support. Paul's wife died in 2018, and Paul has not remarried. Paul received $320,000 of life insurance proceeds (related to his wife's death) in early 2019 and immediately invested the entire amount as shown below. 52. Тax Com Selling Price Date Dividends/ Item Acquired Cost Date Sold Interest 1,000 shares Blue 01/23/19 $ 14,000 12/03/19 $ 3,500 None 400 shares Magenta 600 shares Orange 01/23/19 23,000 $750 01/23/19 230,000 $2,300 100 shares Brown 06/23/13 2,800 01/23/19 14,000 None Green bonds 01/23/19 23,000 $1,200 Gold money market account 01/23/19 30,000 $600 Paul had $42,000 of taxable graduate assistant earnings from State University and received a $10,000 scholarship. He used $8,000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie's day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. Paul received a statement related to the Green bonds saying that there was $45 of original issue discount amortiza- tion during 2019. Paul maintains the receipts for the sales taxes he paid of $735. Paul lives at 1610 Cherry Lane, Bradenton, FL 34212, and his Social Security number is 111-11-1111. Jamie's Social Security number is 123-45-6789. The university withheld $2,000 of Federal income tax from Paul's salary. Paul is not itemizing his deductions. Part 1–Tax Computation Compute Paul's lowest tax liability for 2019. Part 2-Tax Planning Paul is concerned because the Green bonds were worth only $18,000 at the end of 2019, $5,000 less than he paid for them. He is an inexperienced investor and wants to know if this $5,000 is deductible. The bonds had original issue discount of $2,000 when he purchased them, and he is curious about how that affects his investment in the bonds. The bonds had 20 years left to maturity when he pur- chased them. Draft a brief letter to Paul explaining how to handle these items. Also prepare a memo for Paul's tax file.

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter16: Property Transactions: Capital Gains And Losses

Section: Chapter Questions

Problem 52CP

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