Question 1. Charlie Brown uses the filing status of head of household. He has one dependents and he retired from the fire department during the year.
He had the following items of income and expense for 2015:
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Salary, prior to retirement
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164,000
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Interest income from Bank of Albuquerque
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7,100
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Interest income from State of California bonds
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6,800
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Pension (use a 58% exclusion ratio)
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12,000
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Qualified dividends from AT & T
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1,800
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Alimony paid
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4,250
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Child support paid
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7,000
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Income from illegal activities
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3,850
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Unemployment compensation
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5,300
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Lottery winnings!
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2,700
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Long-term capital loss
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(13,800)
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Personal loan from his parents
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9,380
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Itemized deductions
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19,875
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a. What is Charlie's Adjusted Gross Income (line 37, Form 1040) for 2015?
b. What is Charlie's Tax (line 44, Form 1040) for 2015?
Question 2. For each of the following independent situations (a - f), determine the amount, if any, that the taxpayer must recognize in 2015.
a. Air and Sea Company, a corporation which owns a hotel chain, SleepNow, and an airline, FlyNow, have an agreement which allows employees of either company to utilize, at no charge, services provided by the other company. Employees of both are allowed to fly standby on the airline for no charge; employees of both are allowed to stay at any SleepNow hotel at no charge as long as there are empty rooms available. Linus is an airline attendant with FlyNow. In March 2015, he flew on standby to New York City on FlyNow at no cost. (The cost of the flight to paying customers was $550) He also stayed at no charge in an unoccupied room owned by SleepNow. The regular room charge is $280 per night. How much, if any, must Linus include in his gross income for 2015 as a result of these actions?
b. Linus filed his tax return, properly claiming head of household filing status. His employer paid or provided the following to Linus:
Wages $75,000
Fair market value of qualified dependent care services 4,600
Premiums for $35,000 qualified group term life insurance 1,300
Medical insurance premiums paid by employer 1,950
What is the amount, if any, that will be included in gross income in 2015?
c. The Peanuts Company gives all 3 of its employees' free coffee. The fair market value of this coffee to an employee is $0.50/month. What is the amount, if any, will each employee include in his gross income in 2015 for these gifts?
d. Linus, a police officer, was injured in the line of duty. He received the following during 2015:
Salary $72,000
Unemployment compensation 9,000
Compensatory damages for physical injury 18,800
Punitive damages for physical injury 20,000
Cash reward for preventing a break-in 6,000
What is the amount, if any, that will be included in gross income in 2015?
e. Linus repairs power lines for the ABC Utilities Company. He is generally working on a power line during lunch. He eats whenever and wherever he can so that he still gets his work done. He usually purchases something at a convenience store and eats in his truck. ABC pays Linus a cash meal allowance of $120 per month. How much, if any, must Linus include in gross income for 2015?
f. Schultz Co. is an off shore exploration and production company. As a condition of employment, Schultz Co. requires all of its employees to be on 24 hour call for emergencies and requires all of their employees to live in rent-free company-provided housing (value of $18,000 per year). Linus, an employee of Schultz Co., receives a salary of $56,500 per year. How much, if any, will Linus include in his gross income?
Question 3. Uncle Snoopy made gifts to his three nephews. Uncle Snoopy died in 2015.
The first nephew, Woodstock #1, received $30,000 from Uncle Snoopy throughout his lifetime as Christmas presents, birthday presents, etc.
The second nephew, Woodstock #2, received Uncle Snoopy's automobile, which was worth $30,000, when he died.
The third nephew, Woodstock #3, was the beneficiary of a $30,000 life insurance policy that Uncle Snoopy had purchased for $18,000. Woodstock #3 elected to receive the insurance proceeds in installments of $8,000 each year for the next four years, starting in 2015.
a. Calculate the amount that Woodstock #1 is required to include in gross income for 2015.
b. Calculate the amount that Woodstock #2 is required to include in gross income for 2015.
c. Calculate the amount that Woodstock #3 is required to include in gross income for 2015.
Question 4. Lucy received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $70,000 and an adjusted basis of $95,000 to Lucy's grandfather. Determine the gain or loss in each of the following independent situations.
a. If, one year later, Lucy sold the land for $100,000, what would be her gain or (loss) on this transaction?
b. If, one year later, Lucy sold the land for $68,000, what would be her gain or (loss) on this transaction?
c. If, one year later, Lucy sold the land for $75,000. What would be her gain or (loss) on this transaction?
Question 5. Schroeder has the following transactions during the current year. Without considering the transactions, his 2015 AGI is $40,000. Analyze the following transactions and answer the questions below:
- On April 15, 2015, Schroeder sells a painting for $2,000. Schroeder is the artist, and he completed the painting in 2012. His basis for the painting is $50.
- On July 22, 2015, Schroeder receives $28,500 from the sale of stock purchased by his uncle in 2000 for $10,000, which he inherited on March 1, 2015, as a result of his uncle's death. The stock's FMV on that date was $30,000.
- On August 30, 2015, Schroeder sells land for $25,000 that was received as a gift from his brother on May 8, 2015, when the land's FMV was $30,000. His brother purchased the land for $43,000 on November 2, 2007. No gift tax was paid.
a. What is Schroeder's NSTCL or NSTCG?
b. What is Schroeder's NLTCL or NLTCG?
c. What is the effect of capital gains and losses on his AGI?
d. What is his capital loss carryforward to the next year, if any?
Question 6. During 2015, Little Redhead Girl has the following gains and losses:
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LTCG (long-term capital gain)
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$18,350
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LTCL (long-term capital loss)
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(12,800)
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STCG (short-term capital gain)
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11,720
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STCL (short-term capital loss)
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(16,410)
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a. How much is Little Redhead Girl's tax Liability if she is in the 15% tax bracket?
b. How much is Little Redhead Girl's tax Liability if she is in the 28% tax bracket?
Peppermint Patty is a head of household, has $90,000 of taxable income in 2015 from non-capital gain or loss sources, and has the following capital gains and losses:
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28% long-term capital gain
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$ 5,800
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28% long-term capital loss
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(2,300)
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25% long-term capital gain
0%/15% long-term capital gain
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12,500
6,500
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0%/15% long-term capital loss
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(7,900)
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Short-term capital loss
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(1,230)
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What is Patty's 2015 total taxable income and the tax on that taxable income?