Reggy and Dwight, ages 40 and 42, are married, have no children, and live in L. A.
Question:
Reggy and Dwight, ages 40 and 42, are married, have no children, and live in L. A.
Reg has a vacation cabin in Lake Isabella, and Dwight still owns his father’s house in Malibu. Reg works for a music publisher and earned $ 100,000 wages for 2019, while Dwight works for a book publisher and earned $ 80,000 in 2019. The couple’s w-2s for 2019 also included the following information: federal income tax withholding, Reg $ 4,000, Dwight $ 3,000, for state income tax withholding, Reg, $ 1,400, Dwight, $ 900, for social security withholding, Reg, $6,200,Dwight, $ 4,960, and for medicare withholding, Reg, $ 1,450, Dwight, $ 1,160.
The pair owe mortgage debt on all three homes and all debt is secured by the houses, and all mortgages were taken out prior to 2017. The L.A. home has an $ 800,000 purchase money mortgage on it, with a 5% interest rate. The mortgage payments due to the bank for the house totaled principal payments of $ 7,000, and interest of $41,000. The L.A. home is worth $950,000, and it has an equity loan of $ 100,000 on it also, used to buy a car, with a 5% interest rate, with $ 5,000 interest paid during 2019 for 2019 amounts due. The vacation cabin, worth $300,000 has a $200,000 purchase money mortgage to buy the home, with a 6% interest rate, and thus a $12,000 interest payment annually, which was paid by Dwight during 2019, for 2019. The Malibu home has a value of $ 600,000, and has a home equity loan of $ 250,000, used to buy a yacht, with a 4% interest rate, for which Reg paid interest during 2019 for 2019 in the amount of $ 10,000. The couple’s real property taxes were all paid on 12-10-2019, for the L.A. home, $ 19,000, for the Malibu home, $ 7,000, and for the cabin, $ 4,000.
The cabin was rented to a friend for ten days in May 2019, for a total rent received by Dwight from the friend of $ 16,000 (the cabin annual utility and repair cost is $ 4,500).
Reg drives a Jaguar, and he paid the license in March of 2019 (license of $ 2,700 including tax based on value of $ 950) for the Jaguar, and in April of 2019, Dwight paid the license for the car he drives, a Morris Gardens of $1,630 (including ad valorem amount of $ 890).
Reg bought a piano as a present for Dwight, and paid a sales tax related to the purchase of $2,000, as the piano price was $ 28,000. Dwight decided he did not feel he needed the piano, so he donated it to the Salvation Army, which promptly sold it to a dealer for cash needed for the charitable purposes. The value of the piano when it was donated was $ 31,000.
Dwight donated (all required documentation, and substantiation requirements were met for both donated items) some Ford, Inc., stock (bought on 12-14-2006 for $32,000 and worth $27,000 when he donated it) to to the Salvation Army, on 12-15-2019.
What are Reg and Dwight’s refund or amount due for 2019 (including AGI and taxable income for full credit)?
Concepts in Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher