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ACCT 443 Taxation and Investment Opportunities

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ACCT 443 Taxation and Investment Opportunities

Question One
Evelyn and Arthur own a condominium in Nags Head, North Carolina. They use it for their 2
family vacations for a total of 15 days. They rent it out for a total of 185 days. The information
for the condo is as follows:
Rental income $25,000 Mortgage interest
Property taxes
Utilities
Repairs
Depreciation $12,000
$ 6,000
$ 1,000
$ 500
$10,500 Calculate the net income/loss from the property. Identify the type of property this is (personal
residence, vacation home, or rental property) and indicate how the net income or loss would be
treated on Evelyn and Arthur’s married filing joint income tax return. Question Two
Calculate Gross Income, Adjusted Gross Income, and Taxable Income, based on the following
information for the 2015 tax year. John and Susan Wilson are married and both are 48 years old.
They have three children Hayley, Ryder, and Jared, for whom they provide over half of their
support. Hayley is 23 and a full time student at the university. She earned $4,500 from a summer
internship. Ryder is 19 and works part time as a lifeguard. He earned $6,200 during the year.
Jared is 15 and in high school. He has earnings of $6,000 from his lawn mowing business.
Make sure to identify how you are getting your answer specifying how each item listed below is
considered in the calculation.
1) John has $60,000 in wages from his employer Braddock Company.
2) Susan is self employed in the trade or business of a realtor on a full time basis.
Information about her business is determined below.
Gross Receipts from commissions
$80,000
Ordinary and Necessary Business Expenses
$40,000
Total Meals and Entertainment Expenses (not included above)
$12,000 3) John and Susan have investments which generate the following items:
Wells Fargo Bank Savings Interest
Maryland State Bond Interest
United States Treasury Note Interest $5,000
$1,000
$4,000 4) John has a side business which the IRS will call a “hobby” for tax purposes. The
information for this “hobby” is as follows:
Gross Receipts from customers
Ordinary and Necessary Business Expenses $10,000
$15,000 5) John and Susan have the following personal expenses:
Medical expenses
Deductible state and local taxes
Deductible Mortgage Interest on their home
Deductible charitable contributions
Miscellaneous Itemized deductions (not including any
itemized deductions from any other information
referred to above) $10,000
$12,000
$9,000
$2,000
$500 6) John wants to make the maximum contribution to his Conventional IRA (Individual
Retirement Account). He is covered by a pension plan by his employer.