Julie and Gus are married and have no children. They expect to have $380,000 of taxable income in the next year and are considering whether to purchase a house that would provide additional itemized deductions of $114,000 from mortgage interest and property taxes.
Required:
A. What is their marginal tax rate for purposes of making this decision?
B. What is the possible tax savings if they buy the house?
7. Sally, age 40, is blind. She has one dependent child who lives with her and received the following amounts this year.
Insurance proceeds from the death of her grandfather $ 10,000
Child support payments from her ex-spouse 5,000
Salary 45,000
Court awards for the crash that made her blind. None of the payments were punitive.
100,000
Interest income from her bank 6,000
Interest income from city of Dallas bonds 4,000
Required:
A. Calculate Sally's taxable income.
B. Calculate Sally's tax liability.
8. Mr. Orange had the following capital transactions in 2014:
Date Acquired Cost Date Sold Selling Price
01/13/11 $ 4,500 01/10/14 $ 3,000
05/10/13 $ 3,000 02/25/14 $ 4,000
08/09/07 $ 38,000 07/06/14 $ 45,000
11/17/13 $ 6,000 11/16/14 $ 2,000
07/10/13 $ 1,500 12/20/14 $ 5,500
Required:
A. What is Mr. Orange's net long term capital gain or loss?
B. What is Mr. Orange's net short term gain or loss?
C. What is his net capital gain or loss? How will it affect his taxable income?
9. Patrick purchased 100 shares of ABC stock on December 15, 2013 for $5,775. During 2014 the following events occurred:
February 2 10% stock dividend was distributed (nontaxable)
March 2 2 for 1 stock split occurred
August 2 5% stock dividend was distributed (nontaxable)
On December 16, 2014, Patrick sold 100 shares of ABC for $3,600.
Required:
A. Determine his capital gain or loss on this sale.
B. Determine the number of the remaining shares he owns and their basis.