• Write a Professional Letter covering Jacob’s tax concerns
• Calculate Jacob and Julia’s 2019 Tax Liability (partial credit for showing your work)
• Provide advice for Jacob and Julia on tax planning for 2020

Julia and I are going through a difficult time but we are willing to work together to make sure we minimize our tax liability for both of us and maximize our after tax savings.

Our divorce should be finalized this year 2020, hopefully this month, the lawyers are completing the paperwork and I wanted to get some tax advice from you.

In 2019, we were still married, and are trying to decide, if it is better for us to file our taxes, Form 1040, married filing joint or married filing separately since we are going through a divorce.

We have two children. Margaret, who is 19 in full-time college student at Oregon State University, tuition is $17,000 per year, and she has a $10,000 scholarship that she uses $8,000 for tuition and $2,000 for her dorm room cost. She does not live at home except in the summer time and she currently is not working but volunteers with youth.

Brenton, who is 11 years old, lives at home full time and also goes to afterschool care since both Julia and I work full time until around 7pm.

We paid $6,000 in 2019, for Brenton’s afterschool child care expense from 3pm-7pm Monday-Friday.

My 2019 Salary $65,000

Julia’s 2019 Salary $95,000

Moving expenses incurred to change jobs for Julia, $12,000

Inheritance received from deceased uncle $100,000

Life insurance proceeds from policy on uncle’s life (I was named the beneficiary) $200,000 in 2019 and $140,000 in 2020 expected to receive and $90,000 in 2021.

Cash prize from church raffle $3,000

Proceeds from Tesla stock sale, purchased shares on 1/9/2019 Basis $3,780 and Sold on 12/19/2019 Sales Price: $7,780

2019 Payment of church pledge fundraising campaign $4,500

Mortgage Interest, (indebtness on our home is $455,000) $17,000

Property Taxes $6,900

State Income tax to Oregon $9,336

College Tuition for Margaret $9,000 (we are not taking a loan out for her, but paying out of pocket)

Books & Fees for Margaret $2,700

Out of Pocket Medical Expenses for shoulder surgery $16,000

Out of Pocket Medical Expenses for Julia’s face lift anti-wrinkle $8,000

Out of Pocket Miles driving to and from to the hospital for shoulder surgery and doctor visits: 350 miles

Julia and I both paid Federal income tax withholding, withheld by our employers and reported to the IRS, and seen on our W-2.

• Julia’s withholding for 2019 was $22,000
• My withholding for 2019 was $10,000

What is our tax liability to the IRS for 2019 after any applicable withholding and/or credits?

For 2020, we should be divorced, and I owe Julia according to the legal contract money from my Uncle’s inheritance. I have agreed to pay Julia alimony of $20,000 for 2020 and $14,000 for 2021.

Can I deduct the alimony payments to Julia?

Is it better from a tax perspective for the amounts to be called “child support”?

What should we do about the children? Who should claim our children from tax perspective in 2020 and 2021?

The children will split their time between Julia and I.

Julia and I have decided to share joint custody of our children, besides Margaret is over 18 years old and an adult, right?

We are also considering selling our house in 2020, because we cannot agree on who gets to keep the house after the divorce. I have already moved out.

What are the tax benefits or disadvantages of selling our house?

We moved for Julia’s new job and made the house our primary home on January 17^th 2019 in Oregon.

Also this year 2020, Julia sold her wedding band and engagement ring I gave her for sales price $10,000.

I told her I purchased it for her as gift to marry her 20 years ago and it cost me $6,000, and the diamonds went up in value. What are the tax impacts to Julia? Or me?

I am thinking about selling my wedding band which we purchased together as couple for $900 and it is now worth $500, can I take the $400 loss on the ring?

Lastly, I want to start contributing to a retirement account after the divorce is finalized this year, I was considering IRA or Roth IRA, What are the limits and which one provides a timing deferral?

Are there any other tax planning strategies I should consider?

Answer rating: 100% (QA)

Write a Professional Letter covering Jacob s tax concerns ANS WER Dear Jacob Thank you for reaching ... View the full answer