Assignment

This problem is from my Taxation in accounting class:

Joan and Mark are 40 years old, married, file a joint return, and have twin sons, Joey and Johnny, who live with them. The boys are 18 years old. Johnny is a full-time student at Bristol Community College and Joey works part-time at a gas station. Johnny's tuition is covered by scholarships.

Mark works as a baker and earned $51,000 this past year. Joan works as a stitcher and earned $27,000 during the year. Joan and Mark received $120 in tax-exempt interest and $500 of ordinary dividends during the year from some of their investments. Mark is a limited partner in Smarty, Inc. His share of flow through net income for the year is $8,500.

The couple is still paying off Joan's student loans for attending culinary school; they paid $3,200 in qualified student loan interest. Joan had to buy some of her own equipment for her job; she was not reimbursed. She paid a total of $1,000 for small kitchen equipment in order to do her job during the year.

They own their own home and paid $2,100 in real estate taxes and 5,400 in home mortgage interest (they borrowed $500,000 to buy their house). Joan and Mark paid a total of $2,400 in state income taxes. They also paid a total of $1,100 in state sales taxes.

Joey was very sick this past year and spent 3 weeks in the hospital. The out of pocket expenses for the family were $8,500. Additional costs for doctor visits and prescriptions were $1,700. Mark believes in holistic healing and spent another $600 on herbs, vitamins, and organic food for Joey.

A total of $9,800 was withheld from the couple's wages for federal income taxes.

a.) What is Joan and Mark's gross income?

b.) What is Joan and Mark's adjusted gross income

c.) What is Joan and Marks taxable income?

d.) What is Joan and Marks tax liability?

e.) What is Joan and Marks tax due/refund?

f.) What if $10,000 of Joan & Mark total gross income (the amount you calculated in part a.) was long-term capital gain income. Calculate their tax liability based on this change to the source of income.