3. Meredith Grey and Derek Shepherd had a lot going on in 2019. Working as doctors...

  

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3. Meredith Grey and Derek Shepherd had a lot going on in 2019. Working as doctors at Seattle Grace Hospital, the married couple earned $231,000 each in salary. The only other their household is one, adopted daughter, Zola Grey Shepherd, age 8. person in At the beginning of the year, Meredith's mother Ellis Grey passed away. From this, Meredith received $250,000 in inheritance and $100,000 from a lump sum payment of life insurance proceeds. Meredith made two different investments with the inheritance and life insurance proceeds. She invested $150,000 of the total $350,000 above in a portfolio of stocks and bonds (none of which were municipal bonds) to save for her and Derek's future retirement. The portfolio of stocks and bonds increases in value by $15,000 over the year but Meredith and Derrick do not sell any of these investments during the year. Finally, Derek and Meredith received an award worth $25,000 based on medical research they had done during the year. They kept the award money (did not donate it) and used it in 2019 for personal expenditures. It required no additional service. At the end of the year, assume that Derek and Meredith did not have any itemized deductions, credits, or prepayments for the year. Based on the above information, determine the following: a. What was the amount of realizable income for Meredith and Derek in 2019? b. What will be included in Meredith and Derek's gross income for 2019 (i.e. what amount is recognizable)? c. What is the best filing status Derrick and Meredith can use? d. Regardless of your answer in a. – c., assume that Meredith and Derek's total gross income for 2019 is $428,000 and they used Married filing jointly as their filing status. Use the individual tax formula and the appropriate Federal Tax Schedule and other values in Appendix D to calculate Meredith and Derek's 2019 tax due at the end of the year. 2019 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable If taxable income is But not income is But not over: over: The tax is: over: over: The tax is: $ 9,700 $ 39,475 $970 plus 12% of the excess 10% of taxable income $ 13,850 10% of taxable income 9,700 $ 13,850 $ 52,850 $1,385 plus 12% of the excess over $9,700 over $13,850 $ 39,475 $ 84,200 $4,543 plus 22% of the excess $ 52,850 $ 84,200 $6,065 plus 22% of the excess over $39,475 over $52,850 $ 84,200 $160,725 $14,382.50 plus 24% of the excess $ 84,200 $160,700 $12,962 plus 24% of the excess over $84,200 over $84,200 $204,100 $31,322 plus 32% of the excess $160,725 $204,100 $32,748.50 plus 32% of the excess $160,700 over $160.725 over $160,700 $204,100 $510,300 $46,628.50 plus 35% of the excess $204,100 $510,300 $45,210 plus 35% of the excess over $204,100 $152,380 plus 37% of the excess over $204,100 $510,300 $153,798.50 plus 37% of the excess $510,300 over $510,300 over $510,300 Schedule Y-1-Married Filing Jointly Schedule Y-2-Married Filing Separately or Qualifying Widow(er) If taxable If taxable income is But not income is But not over: over: The tax is: over: over: The tax is: 9,700 10% of taxable income $ 19,400 $ 78,950 $1,940 plus 12% of the excess 10% of taxable income $ 9,700 $ 39,475 $970 plus 12% of the excess $ 19,400 over $9,700 over $19,400 $ 39,475 $ 84,200 $4,543 plus 22% of the excess $ 78,950 $168,400 $9,086 plus 22% of the excess over $39,475 over $78,950 $ 84,200 $160,725 $14,382.50 plus 24% of the excess $168,400 $321,450 $28,765 plus 24% of the excess over $84,200 over $168,400 $160,725 $204,100 $32,748.50 plus 32% of the excess over $160,725 $321,450 $408,200 $65,497 plus 32% of the excess over $321,450 $204,100 $306,175 $46,628.50 plus 35% of the excess $408,200 $612,350 $93,257 plus 35% of the excess over $204,100 over $408,200 $306,175 $82,354.75 plus 37% of the excess $612,350 $164,709.50 plus 37% of the excess over $612,350 over $306,175 Estates and Trusts If taxable income is But not over: over: The tax is: $ 2,600 $ 9,300 $ 10% of taxable income $ 2,600 $260 plus 24% of the excess over $2,600 $ 9,300 $12,750 $1,868 plus 35% of the excess over $9,300 $12,750 $3,075.50 plus 37% of the excess over $12,750 Tax Rates for Net Capital Gains and Qualified Dividends Rate* Taxable Income Married Married Head of Trusts Filing Jointly Filing Separately Single Household and Estates 0% $0 - $78,750 $0 - $39,375 S0 - $39,375 S0 - $52.750 S0 - $2,650 15% $78,751 - $488,850 S39,376 – $244,425 $39,376 – $434,550 $52,751 - $461,700 $2,651 - $12,950 20% $488,851+ $244,426+ $434,551+ $461,701+ $12,951+ *This rate applies to the net capital gains and qualified dividends that fall within the range of taxable income specified in the table (net capital gains and qualified divi- dends are included in taxable income last for this purpose). Basic Standard Deduction Amounts* Amount of Each Additional Standard Deduction for Taxpayers Who Are Age 65 or Blind 2018 2019 Filing Status Amount Amount 2018 2019 Amount Amount Married Filing Jointly $24,000 $24,400 Married taxpayers $1,300 $1,300 Qualifying Widow or Widower Married Filing Separately $24,000 $24,400 $12.000 $12,200 Single taxpayer or head of household $1,600 $1,650 Head of Household $18,000 $18,350 Single $12,000 $12,200 Exemption Amount *For individuals claimed as a dependent on another return, the 2019 standard deduction is the greater of (1) $1,100 or (2) $350 plus earned 2018 2019 income not to exceed the standard deduction amount of those who are $4,150 $4,200* not dependents. *Used for qualifying relative gross income test. 3. Meredith Grey and Derek Shepherd had a lot going on in 2019. Working as doctors at Seattle Grace Hospital, the married couple earned $231,000 each in salary. The only other their household is one, adopted daughter, Zola Grey Shepherd, age 8. person in At the beginning of the year, Meredith's mother Ellis Grey passed away. From this, Meredith received $250,000 in inheritance and $100,000 from a lump sum payment of life insurance proceeds. Meredith made two different investments with the inheritance and life insurance proceeds. She invested $150,000 of the total $350,000 above in a portfolio of stocks and bonds (none of which were municipal bonds) to save for her and Derek's future retirement. The portfolio of stocks and bonds increases in value by $15,000 over the year but Meredith and Derrick do not sell any of these investments during the year. Finally, Derek and Meredith received an award worth $25,000 based on medical research they had done during the year. They kept the award money (did not donate it) and used it in 2019 for personal expenditures. It required no additional service. At the end of the year, assume that Derek and Meredith did not have any itemized deductions, credits, or prepayments for the year. Based on the above information, determine the following: a. What was the amount of realizable income for Meredith and Derek in 2019? b. What will be included in Meredith and Derek's gross income for 2019 (i.e. what amount is recognizable)? c. What is the best filing status Derrick and Meredith can use? d. Regardless of your answer in a. – c., assume that Meredith and Derek's total gross income for 2019 is $428,000 and they used Married filing jointly as their filing status. Use the individual tax formula and the appropriate Federal Tax Schedule and other values in Appendix D to calculate Meredith and Derek's 2019 tax due at the end of the year. 2019 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable If taxable income is But not income is But not over: over: The tax is: over: over: The tax is: $ 9,700 $ 39,475 $970 plus 12% of the excess 10% of taxable income $ 13,850 10% of taxable income 9,700 $ 13,850 $ 52,850 $1,385 plus 12% of the excess over $9,700 over $13,850 $ 39,475 $ 84,200 $4,543 plus 22% of the excess $ 52,850 $ 84,200 $6,065 plus 22% of the excess over $39,475 over $52,850 $ 84,200 $160,725 $14,382.50 plus 24% of the excess $ 84,200 $160,700 $12,962 plus 24% of the excess over $84,200 over $84,200 $204,100 $31,322 plus 32% of the excess $160,725 $204,100 $32,748.50 plus 32% of the excess $160,700 over $160.725 over $160,700 $204,100 $510,300 $46,628.50 plus 35% of the excess $204,100 $510,300 $45,210 plus 35% of the excess over $204,100 $152,380 plus 37% of the excess over $204,100 $510,300 $153,798.50 plus 37% of the excess $510,300 over $510,300 over $510,300 Schedule Y-1-Married Filing Jointly Schedule Y-2-Married Filing Separately or Qualifying Widow(er) If taxable If taxable income is But not income is But not over: over: The tax is: over: over: The tax is: 9,700 10% of taxable income $ 19,400 $ 78,950 $1,940 plus 12% of the excess 10% of taxable income $ 9,700 $ 39,475 $970 plus 12% of the excess $ 19,400 over $9,700 over $19,400 $ 39,475 $ 84,200 $4,543 plus 22% of the excess $ 78,950 $168,400 $9,086 plus 22% of the excess over $39,475 over $78,950 $ 84,200 $160,725 $14,382.50 plus 24% of the excess $168,400 $321,450 $28,765 plus 24% of the excess over $84,200 over $168,400 $160,725 $204,100 $32,748.50 plus 32% of the excess over $160,725 $321,450 $408,200 $65,497 plus 32% of the excess over $321,450 $204,100 $306,175 $46,628.50 plus 35% of the excess $408,200 $612,350 $93,257 plus 35% of the excess over $204,100 over $408,200 $306,175 $82,354.75 plus 37% of the excess $612,350 $164,709.50 plus 37% of the excess over $612,350 over $306,175 Estates and Trusts If taxable income is But not over: over: The tax is: $ 2,600 $ 9,300 $ 10% of taxable income $ 2,600 $260 plus 24% of the excess over $2,600 $ 9,300 $12,750 $1,868 plus 35% of the excess over $9,300 $12,750 $3,075.50 plus 37% of the excess over $12,750 Tax Rates for Net Capital Gains and Qualified Dividends Rate* Taxable Income Married Married Head of Trusts Filing Jointly Filing Separately Single Household and Estates 0% $0 - $78,750 $0 - $39,375 S0 - $39,375 S0 - $52.750 S0 - $2,650 15% $78,751 - $488,850 S39,376 – $244,425 $39,376 – $434,550 $52,751 - $461,700 $2,651 - $12,950 20% $488,851+ $244,426+ $434,551+ $461,701+ $12,951+ *This rate applies to the net capital gains and qualified dividends that fall within the range of taxable income specified in the table (net capital gains and qualified divi- dends are included in taxable income last for this purpose). Basic Standard Deduction Amounts* Amount of Each Additional Standard Deduction for Taxpayers Who Are Age 65 or Blind 2018 2019 Filing Status Amount Amount 2018 2019 Amount Amount Married Filing Jointly $24,000 $24,400 Married taxpayers $1,300 $1,300 Qualifying Widow or Widower Married Filing Separately $24,000 $24,400 $12.000 $12,200 Single taxpayer or head of household $1,600 $1,650 Head of Household $18,000 $18,350 Single $12,000 $12,200 Exemption Amount *For individuals claimed as a dependent on another return, the 2019 standard deduction is the greater of (1) $1,100 or (2) $350 plus earned 2018 2019 income not to exceed the standard deduction amount of those who are $4,150 $4,200* not dependents. *Used for qualifying relative gross income test.