Albert received $96,000 from Plum Company

42) Albert S. Moore is 35 years old and is married to Bonnie Moore who is
37. They file a joint return and have two dependent children. In 2012, Albert
and Bonnie had the following transactions:

1) Albert received
$96,000 from Plum Company. He worked on a construction project in Mexico from
July 1, 2011 through December 31, 2012. Withholding for Federal income tax was
$4,600. The proper amount of FICA taxes was withheld.
2) Albert & Bonnie received $1,600 of interest on US government bonds and
$7,000 of interest on Montgomery County School bonds.
3) Bonnie was involved in an automobile accident in 2011 and incurred $12,000
of medical expenses. Insurance paid $8,000 of the expenses, and Albert and Bonnie
deducted the remaining $4,000 on their 2011 return. During 2012, Bonnie
received a settlement from the other driver’s insurance company. She received
$12,000 for her medical expenses, $70,000 as compensatory damages for the
physical injury, and $40,000 of punitive damages.
4) Bonnie received 10 shares of Chery Inc as a stock dividend. The shares
received had a fair market value of $900. Bonnie had the option of receiving
cash equal to the value of the shares but chose not to do so.
5) Albert paid $12,000 of alimony to his first wife, Rosa.
6) Albert and Bonnie’s itemized deductions were as follows:
a) State income taxes paid and withheld totaled $2,900. In addition, a $1,600
overpayment for their 2011 state taxes (deducted on the 2011 Federal return as
an itemized deduction) was applied to their 2012 liability.
b) Real estate taxes on their principal residence were $1,600
c) Interest on their personal residence was $3,800
d) Cash contributions to their church were $2,500
Compute the Moore’s net tax payable (or refund due) for 2012″

47) In 2012, Bob’s unincorporated business has a net loss of $30,000. Bob
has investment of $40,000. Itemized deductions and personal exemptions total
$26,000. Thus, on his 2012 tax return, his taxable income was a negative $16,000.
Bob discovered that an employee has stolen $25,000 (pocketing the proceeds from
unrecorded sales) from the business. This $25,000 theft loss is included in
calculating the net loss of Bob’s business of $30,000. In 2013, Bob recovers
the $25,000 from the former employee. How can the tax benefit rule assist Bob
in 2013? Provide a very specific answer with supporting computations.

18) The taxpayer’s marginal tax bracket is 25%. Which would the taxpayer
a) $1.00 taxable income rather than $1.00 tax-exempt income
b) $0.80 tax-exempt income rather than $1.00 taxable income
c) $1.25 Taxable income rather than $1.00 tax-exempt income
d) $1.30 taxable income rather than $1.00 tax-exempt income
e) None of the above.

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