Sara Williams (age 42) and Jeff Brinser (age 40) are not married but live together. They live at 1324 Forest Drive, Reno, NJ 89501 which is owned by Sara. Her Social Security number is 555-94-9358. Jeff's Social Security number is 340-45-4545 but currently is unemployed. He has not worked since December of 2012. Sara's earnings and withholding as the manager of a local casino for 2013 are as follows: Gross Annual Earnings from the Lucky Ace Casino $185,000 [This amount is before any employee contributions] Federal Income Tax Withheld $42,800 State Income Tax Withheld $8,200 Sara participates in Lucky Ace Casino's 401(k) plan.
She decided to contribute $10,000 of her annual earnings during the year to an employer-sponsored retirement plan and participate in the employer-sponsored health insurance plan. Her premiums of $7,200 were withheld from her salary pre-tax. Sara's other income includes qualifying dividends on New Jersey Light & Power stock of $2,500 and interest on a savings account at New Jersey National Bank of $5,575. Jeff has some income from a savings account in the amount of $200. He is currently looking for a job in his field and spent $2,000 for outplacement services. He lost his job suddenly when the company went bankrupt and closed their doors. Sara has been supporting him while he looks for a job. Sara received a prize from a local organization.
She received 10 gift certificates each valued at $100.00 to local merchants. Sara received all the certificates in December of 2013 but did not use them until the next year. (Does not count for this year maybe) Sara received an inheritance from an aunt this year. Her aunt left her 200 shares of Macrosoft, Inc and was valued at $75.00 per share on the date of her death. Her aunt originally paid $18.00 per share in 1997. Sara sold the stock this year when the price per share was $88.00. (no idea) Sara also sold Devon, Inc this year. She purchased the stock 10 years ago on a tip when she graduated college. She purchased the stock for $5,000 but sold it for $100 this year. She regretted making the investment on such a speculative stock and she hopes to get some tax benefit. Sara also sold a painting this year. She purchased the painting from her mother for fair market value 20 years ago for $1,000. She sold the painting for $8,000 on November 30th. She had an offer she could not refuse. Sara lost a diamond earring this year.
Luckily her homeowner's insurance covered the loss. The earring was replaced but Sara still had to cover the $500 deductible. The insurance company valued the earring at $4,000. In late summer the couple was visiting friends and the clothes washer overflowed and damaged the new hardwood floors that Jeff just installed. The water destroyed the floors and the insurance company hired a restoration company to mitigate the damage. The company charged $8,000 for the clean-up and the floors will cost $5,000 to replace. The insurance company paid the $13,000 less the couple's deductible of $1,000. The insurance company is suing the manufacturer of the washer and they hope to be reimbursed for the deductible but have not at year-end. Since Jeff has not been working he has been doing work on house projects. Last week Jeff was painting and dumped a bucket of paint on the living room carpet.
The cost to replace the carpet was $3,000. They have $1,000 deductible if they report it to home owner's insurance. Sara is worried about her rates going up so she decided not to report it to homeowner's insurance and paid for the new carpet herself.(does not matter) Sara decided that she needed to ensure her employment and decided on taking a training course for managers. The casino thought it was a great idea but did would only reimburse her $500 for the cost of the course. The tuition for the course was $2,700 but Sara felt that it would be worth the investment and paid for the training out of her own pocket ($2,200). It actually paid off because at the end of the year, Sara received a bonus of $4,000 for job performance. Sara and Jeff decided to take two weeks off from the casino and visit her brother in Alaska.
While they were gone she advertised her house for rent on the internet. A family rented her house for $2,000 per week plus paid Sara's cleaning service $300 to have the house cleaned before they left. It worked out great and Sara thinks she will do it again next year. During the year, Sara paid the following amounts (all of which can be substantiated): Home Mortgage Interest $19,700 Credit Card Interest $1,760 Auto Loan Interest $4,300 Auto Insurance $900 Depreciation of Personal Residence $3,038 Real Estate Taxes on Personal Residence $6,200 Real Estate Taxes for her brother's property $2,000 (She paid them when she went to Alaska) Co-payments and Prescriptions $790 Over-the-Counter Medications $275 Income Tax Prep $700 Safe Deposit Box $45 Financial Planner $300 Legal Fees for Divorce Issues (Sara's) $800 Charitable Contributions: Boy Scouts $800 St.
Matthew School for Boys $300 U. of Nevada Med. School $1,000 New Jersey Democratic Party $500 Fund-Raising Dinner for the Arizona Museum (value of the dinner $50) $100 Sara wants to become a famous photographer. Pursuant to this desire she runs a photographic business in her spare time and incurs the following expenses related to this activity: Depreciation on photo equipment $450 Film & photographic supplies $2,650 Travel to locations to take photos $1,430 (including $1,000 for Alaska trip) During the year Sara sells three photographs for $175 each. Sara has had similar results from this activity for the last five years. Required: Compute the following information for Sara showing all computations: AGI: Taxable Income: Tax Liability: Amount Refunded or Owed.