tax problems - questin and answer ,.,. ch 15

64. Robert A. Kliesh, age 41, is single and has no dependents. Robert’s Social Security number is 111-11-1111. His address is 201 Front Street, Missoula, MT 59812. He is independently wealthy as a result of having inherited sizable holdings in real estate and corporate stocks and bonds.
Robert is a minister at First Presbyterian Church, but he accepts no salary from the church. However, he does reside in the church’s parsonage free of charge. The fair rental value of the parsonage is $3,000 a month. The church also provides him with a cash grocery allowance of $200 a week.
Examination of Robert’s financial records provides the following information.
a. On January 16, 2012, Robert sold 1,000 shares of stock for a gain of $10,000. The stock was acquired 14 months ago.
b. He received $30,000 of interest on private activity bonds that he had purchased in 2007. He also received $40,000 of interest on tax-exempt bonds that are not private activity bonds.
c. Robert received gross rent income of $190,000 from an apartment complex he owns.
He qualifies as an active participant.
d. Expenses related to the apartment complex, which he acquired in 1987, were $225,000.
e. Robert’s interest income (on CDs) totaled $23,000. Robert invests only in growth stocks, so he earns no dividend income.
f. He won $60,000 from playing the lottery.
g. On October 9, 2010, Robert exercised his rights under Falcon Corporation’s incentive stock option plan. For an option price of $20,000, he acquired stock worth $75,000. The stock became freely transferable in 2012. At the date the stocks became freely transferable, their fair market value was $95,000.
h. Robert was the beneficiary of an $800,000 life insurance policy on his Uncle Jake. He received the proceeds in October.
i. Robert reported the following potential itemized deductions.
• $5,200 fair market value of stock contributed to First Presbyterian (basis $3,000).
He had owned the stock for two years.
• $4,200 interest on consumer purchases.
• $3,900 state and local income tax.
• $6,500 medical expenses (before AGI floor) for himself. He also paid $15,000 of medical expenses for a parishioner who died.
• $300 for a safe deposit box that is used to store investments and related legal documents.
• $750 contribution to the campaign of a candidate for governor.
• $5,000 paid for lottery tickets associated with playing the state lottery. Robert contributed $5,000 of his net winnings to the church.
• $5,000 contribution to his traditional IRA.
• Robert lives in Montana, so he paid no sales tax.
j. Robert made $27,500 of estimated tax payments for the year.
Use Forms 1040 and 6251 and Schedules A, B, D, and E to compute Robert Kliesh’s 2012 Federal income tax liability (including AMT, if any). Suggested software: H&R
BLOCK At Home.

65. Robert M. and Jane R. Brewster live at 1802 College Avenue, Carmel, IN 46032. Robert is age 48, and Jane is age 37. They are married and file a joint return for 2012. The
Brewsters have two dependent children, Ellen J. and Sean M., who are 10-year-old twins.
Ellen’s Social Security number is 123-45-6788, and Sean’s is 123-45-6787. Robert pays child support of $15,000 for Amy, his 17-year-old daughter from his previous marriage.
Amy’s Social Security number is 123-45-6786. According to the divorce decree, Margaret,
Robert’s former wife, has legal custody of Amy. Margaret provides the balance of Amy’s support (about $6,000).
Robert (111-11-1111) is a factory supervisor, and Jane (123-45-6789) is a computer systems analyst. The Brewsters’ Forms W–2 reflect the following information.
Robert Jane
Salary (Indiana Foundry, Inc.) $95,000
Salary (Carmel Computer Associates) $103,000
Federal income tax withheld 24,750 27,000
State income tax withheld 5,000 5,400
In addition to their salaries, the Brewsters report the following income items.
Interest income (Carmel Sanitation District Bonds) $19,500
Interest income (Carmel National Bank) 4,600
Qualified dividend income (Able Computer Corporation) 15,000
Gambling income 6,500
Gift from Uncle Raymond to Robert 27,000
Jane inherited $900,000 from her grandfather in January and invested the money in the
Carmel Sanitation District Bonds, which are 2008 private activity bonds. Jane was selected as the Carmel “Citizen of the Year” and received an award of $7,500. She used the $7,500 to pay off some credit card debt.
The Brewsters incurred the following expenses.
Medical expenses (physician, hospital bills) $23,900
Real property tax on personal residence 8,100
Mortgage interest on personal residence (reported on Form 1098) 9,400
Investment interest expense 3,500
Contributions 15,500
Gambling losses 6,800
Sales taxes (from sales tax table) 1,851
On March 1, Robert and Jane contributed Ace stock to the Carmel Salvation Army, a public charity. They had acquired the stock on February 9, 2001, for $6,500. The stock was listed on the New York Stock Exchange at a value of $12,000 on the date of the contribution.
In addition, Robert and Jane contributed $3,500 during the year to Second
Church.
Robert sold five acres of land to a real estate developer on October 12, 2013, for $100,000. He had acquired the land on May 15, 2008, for $86,000.
Compute the 2013 tax liability (including AMT, if any) for the Brewsters. Write a letter to the Brewsters indicating whether they have a Federal income tax refund or balance due, and suggest possible tax planning strategies for future years.