Comprehensive Problem $5-77$ Part $1$ and $3($Algo$)$

Required:

Assuming the Workmans file a joint tax return, determine their gross income minus expenses on the day care business $($this is called total income on the Form $1040).$

Assuming the Workmans live in California, a community property state, and that Diana and Ryan flle separately, what is Diana's gross income minus expenses on the day care business?

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Assuming the Workmans file a joint tax return, determine their gross income minus expenses on the day care business $($this is called total income on the

Form $1040).$ Assuming the Workmans live in California, a community property state, and that Diana and Ryan file s Diana and Ryan Workman were married on January $1$ of last year. Ryan has an eight$-$year$-$old son, Jorge, from his previous marriage. Diana works as a computer programmer at

Datafile Incorporated $($DV$)$ earning a salary of $$101,000.$ Ryan is self$-$employed and runs a day care center. The Workmans reported the following financial information pertaining to

their activities during the current year.

a$.$ Diana earned a $$101,000$ salary for the year.

b$.$ Diana borrowed $$13,000$ from DI to purchase a car. DI charged her $2$ percent interest $($ $$260)$ on the loan, which Diana paid on December $31.$ DI would have charged Diana

$$820$ if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan.

c$.$ Ryan recelved $$2,500$ in alimony and $$5,500$ in child support payments from his former spouse. They divorced in $2016.$

d$.$ Ryan won a $$1,000$ cash prize at his church$-$sponsored Bingo game.

e$.$ The Workmans received $$1,000$ of interest from corporate bonds and $$750$ of interest from a municipal bond. Ryan owned these bonds before he married Daina.

f$.$ The couple bought $70$ shares of ABC Incorporated stock for $$50$ per share on July $2.$ The stock was worth $$67$ a share on December $31.$ The stock pald a dividend of $$1$ per

share on December $1.$

Ryan's father passed away on April $14.$ He inherited cash of $$60,000$ from his father and his baseball card collection, valued at $$3,000.$ As the beneficlary of his father's life

insurance policy, Ryan also recelved $$160,000.$

h$.$ The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $$2,200.$

L$.$ Diana recelved $$2,400$ cash for reaching $10$ years of continuous service at DI$.$

J$.$ Diana was hit and injured by a drunk driver while crossing a street at a crosswalk. she was unable to work for a month. She recelved $$8,000$ from her disability insurance. DI

paid the premiums for Diana, but it reported the amount of the premiums as compensation to Diana on her year$-$end W$-2.$

k$.$ The drunk driver who hit Diana in part $(1)$ was required to pay her $$3,000$ medical costs, $$2,500$ for the emotional trauma she suffered from the accident, and $$7,000$ for

punitive damages.

For meeting her performance goals this year, Diana was informed on December $27$ that she would recelve a $$6,000$ year$-$end bonus. DI $($located in Houston, Texas$)$ mailed

Diana's bonus check from its payroll processing center $($Tampa$,$ Florida$)$ on December $28.$ Diana didn't recelve the check at home until January $2.$

m$.$ Ryan is a $10$ percent owner of MNO Incorporated, a Subchapter S corporation. The company reported ordinary business income for the year of $$120,000.$ Ryan acquired the

MNO stock two years ago.

n$.$ Ryan's day care business collected $$85,000$ in revenues. In addition, customers owed him $$8,000$ at year$-$end. During the year, Ryan spent $$10,500$ for supplies, $$6,500$ for

utilities, $$25,000$ for rent, and $$1,000$ for miscellaneous expenses. One customer gave him use of their vacation home for a week $($worth $$7,500)$ in exchange for Ryan allowing

their child to attend the day care center free of charge. Ryan accounts for his business activities using the cash method of accounting.

o$.$ Diana's employer pays the couple's annual health insurance premiums of $$10,500$ for a qualified plan.