taxation

East-West University
Accounting 305
Taxation
Final Examination

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Tom and Mary Gates are married and living together. They were married on December 30, 20019. The tax return is filed for 2020. You are filing this return on April 12, 2018 for the tax year 2019. They have 3 children, Marissa, age 17, social security number 344-45-4508, Peter, who lives at home, social security number is 355-40-9898. He is 28 years old and works at a Chevrolet dealership. The third child is living in a terminal care home, because he is physically disabled. His name is Mark and he is 15. His social security number is 318-44-0989. Tom and Mary provide all of his support.

Mary also provides full support for her mother, who is Maria, who lives in South America. She is 59 years old and is also disabled. Her social number is 329-09-0876.

Mary receives child support from a previous marriage in the amount of $300 per month for Marissa. She also receives alimony from her ex-husband, Richard Marks, in the amount of $3000 per month. His social security number is 342-45-5678.

Mary was out of work for a while and received $5,500 in unemployment compensation.

Mary also inherited $500,000 this year from a life insurance payable to her after her father died.

Wage info is as follows:

Tom-Computer Programmer
Wages tips and other compensation-$65,000.00
Federal Income Tax withheld-$9,080.00
State income tax withheld-$1,778.00

Mary-Teacher
Employer-Du Page HS District #88
Wages tips and other compensation-$8.097.04
Federal Income Tax withheld-$227.04
State income tax withheld-$242.99

They also received a state income tax refund from last year of $450.00

They have received $2500 in interest in a savings account in Harris Bank
They received $4000 in dividends from Apple stock
They received $15,000 in interest from the City of South Haven Michigan Power plant.

Medical Information:

Due to cost cutting, the Gates’ must pay their own health insurance premiums; their employer reimburses nothing. This amounts to $2080 per month.
Qualified dental expenses are $2,500.00.
Tom had a hair transplant that cost $4,000.00
Mary takes a large amount of vitamins. Last year the cost of the vitamins was $3,500.00
Health club dues are $3,000.00

Interest Information:

Home mortgage interest is $11,000.00
Credit card interest is $2,567.00
Car loan interest is $4,200.00
Boat interest is $3,500.00

Charitable Contributions:

Tom gives $25.00 per week to a homeless person at the train station.
The Gates’ give $200.00 per month to St. Peter’s Catholic Church.

Casualty and Theft Losses:

The year was a bad one for the Gates. Mary was robbed in the parking lot of the school and lost her Rolex watch that was valued at $7,500. Unfortunately, she neglected to list this on her home insurance policy and the insurance company did not cover the loss. Also, the crack in the basement floor finally became worse, the entire floor had to be replaced at a cost to the Gates of $4,500. Tom also was hit by an uninsured motorist and his care was destroyed, however, the insurance company paid for the entire replacement of the car.

Other Expenses:

Tom is very concerned about his job at the computer company and has started taking pre nursing classes school at De Paul University. His tuition paid in 2017 was $13,000. Mary also started taking aerobic classes to get in shape; these cost $1,500 per month. Tom is suffering from depression and was advised by his psychiatrist to take a trip. He went to Key West at a cost of $2,500.00.

The Gates own a 2 flat apartment they purchased last year at a cost of $450,000, land 10%, salvage is 5%. Life is 25 years. They live in one unit and rent the other at a rate of $3,000 per month. The real estate taxes are $28,000, interest is $45,000. Supplies are $5,000, utilities for the entire building are $10,000. Commissions to real estate broker are $5000. Repairs are $25,000 all to the owners unit which was completely remodeled.

The Gates own a parking lot on the near south side that they receive $2000 per month. The parking lot was given to them as an inheritance and the real estate taxes are $14,000 and insurance is $4,000.

Tom owns a baseball card shop that he operates part time. Last year his revenues were $8,000. His rent was $250 per month. His beginning inventory was $0 as he just started. His purchases were $5000 and his ending inventory was $1,000. Repairs were $4000 and Insurance was $3000.

Complete the tax return.

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