MEMO to File Just got call from Bob. His facts - In February 2020, Bob was
Question:
MEMO to File – Just got call from Bob. His facts - In February 2020, Bob was hit by a van delivering vaccines. The driver was speeding. Bob suffered a severe injury to his neck. The delivery company’s insurance company settled the case quickly by paying the following:
Medical expenses $ 130,000
Injury to his neck 100,000
Pain 50,000
Fee for emotional damages 50,000
SUFFERING 25,000
Punitive damages 50,000
TOTAL ALL $405,000
He returned to work in June 2020! Great. In August the company laid him off – unemployment – BAD! But he collected $3000 in unemployment benefits in August through December - $15,000 in total.
Later that year – November – poor Bob was diagnosed with cancer – sad…he’s only 58. Gave him 6 months to live. So he cashed out his whole life insurance policy – got $25,000 (his total premiums paid in were 20,000 – so he had a $5,000 “gain”). He retired and used this $25,000 to head to Key West and party.
His (now) former employer felt bad and sent him a $25,000 gift – to acknowledge those 25 years Bob had been a loyal employee! – in December 2020 he got the check – It was forwarded to his new “home “ In Key West.
His gross pay for January 2020 was $5000. For June and July his pay was $12,000 in total (the company had given him a $1,000 monthly raise when he came back to work!). His former co-worked took up a collection and sent him $3,000 too – arrived on Christmas Day 2020! Then – on 12/31/20 – he got a registered mail item – and a check for $50,000 -Aunt Sally had died and left him this money!
So, what’s Bob’s AGI for 2020 – he needs to know! His former employer had withheld federal income tax of $2500 from his paychecks, in total during 2020. These were the only federal income tax payments made during 2020. Bob wants to know if he will owe tax when he files or if he will get a refund. Either way – how much will it be? He has no itemized deductions and is single.
South Western Federal Taxation 2016 Comprehensive
ISBN: 9781305395114
39th edition
Authors: James H. Boyd, William H. Jr. Hoffman, David M. Maloney, William A. Raabe, James C. Young