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Retirement Planning

Individual TaxFormula

The filing status and number of personal and dependent exemptions claimed by Sally.

Sally is divorced and provides a home for her 2-year old daughter, Emma, and her 26-year old sister, Janet.

Emma’s Dad pays child support of approximately 30% of Emma’s support. Janet works full time as a teacher,

earning $35,000 and is not married.

What is HOH and 2 exemptions

Three individual tax deductions that are

Above-The-Line-Deductions

Moving Expenses

½ of Self-Employment income

Self-employed health insurance deductions

Alimony paid

IRA Deduction

Student loan interest

Educator Expenses

Domestic Production Activities Deduction

AGI of a single individual with no dependents and:

Salary $50,000

Interest income $1,000

Charitable contributions $2,000

Mortgage interest expense $3,000

Moving expense $5,000

What is $46,000

Taxable Income of a married couple, filing joint, with 2 dependent children and:

Wages $200,000

Dividend income $2,200

Short-term capital gain $3,000

Long-term capital loss ($8,000)

Mortgage interest expense $15,000

Medical expenses $2,000

Real estate taxes $3,200

What is $165,400

The tax due or (refund) for a single individual, no dependents, with:

Salary $100,000

Charitable contributions $5,000

Investment expenses $3,000

Tax withheld $20,000

What is a refund of $1,506.75

Amount of deductible compensation paid to CEO of XYZ public company if CEO receives:

$900,000 cash compensation

50% bonus (or $450,000) if profit targets met

What is $1,350,000

One reason why a worker would want to be an employee, versus an independent contractor.

What is:

Health insurance paid by employer

Participate in retirement plan

Only pay ½ Social Security and Medicare

Business expenses reimbursed

More security of regular income

Unemployment benefits if terminated

Taxable wages in 2013 of Jim, who receives:

Cash compensation $70,000

NQ stock options for 1,000 shares stock, strike $3, when stock selling at $10. Granted 12/15/13

Health insurance premiums paid $16,000

Participates in 401K, employee deferral $10,000

Reimbursed for employee travel $4,000

What is $60,000

Bob is 100% owner and CEO of his private C Corporation. The corporation has $5 million net income, before payments to

Bob. Bob pays himself a salary of $4,900,000.

The IRS may re-characterize some of Bob’s salary as _____________.

What is Dividend?

John’s deductible miscellaneous itemized deductions in 2013 if he:

Spends $750 in job hunting expenses to find a new job

Drives 5,000 miles for employee business, with no reimbursement

Pays $500 for professional dues related to his job

Buys employee supplies of $400, reimbursed for all

Has AGI of $60,000.

What is $2,875?

A type of qualified defined-contribution plan where employee elects to contribute some of his salary, and the employer may “match” all or a

portion of that contribution.

What is a 401K Plan?

Jill’s maximum contribution to her self-employed Keogh Plan if her net income from Schedule C is $220,000 and

Interest income is $20,000.

What is $44,000?

Taxable amount of Regular IRA distribution if received $12,000 during the year, age 63, and all contributions in the

past have been tax-deductible.

What is $12,000?

The taxable income recognized by John, who exercises 200 Non-Qualified stock options, with a

strike price of $10, when the stock is trading at $22.

What is $2,400?

The capital gain recognized by Emily when she sells 400 shares of employer stock at $40

per share, that she received when she exercised 400 NQ stock options, with a strike

of $20, when the stock was trading at $35.

What is $2,000?

John’s federal taxable investment income if he receives:

Interest from municipal bond $900

Interest from money-market $500

Interest from US Treasury bond $4,000

Interest from GE corporate bond $6,000

ATT dividends(qualified) $3,000

Hoya Foreign dividends(nonqualified) $3,500

What is $17,000?

Ed’s total stock basis in GM stock if he:

Purchased for $30,000

Received cash dividends of $1,000

Reinvested stock dividends of $2,500

What is $32,500?

The amount and character of Sue’s gain or loss in 2013 if she:

Bought 2,000 shares of NeverFail Inc. in 2000 at $50 per share

NeverFail is delisted from stock exchange in 2012

NeverFail files bankruptcy in 2013

What is $100,000 long-term capital loss?

Tax consequence to Ray if he:

Is 100% owner and founder of a start-up corporation called App-Me, Inc., in which he invested $1,000,000 of his own

money in the stock.

Three years later, sells his company and receives:

20,000 shares of Google, Inc., worth $12 million

What is $11 million realized gain,

but zero gain for tax purposes?

Roy’s AGI if he has the following income and losses:

Wages $100,000

Interest income $10,000

Long-term capital loss ($8,000)

Net income from rental house $2,000

Net loss from restaurant that he spends no time in ($12,000)

What is $107,000?

Gregg’s 2013 taxable gifts (before lifetime exemption) if he:

Gave $20,000 to his alma mater University

Transferred $50,000 cash to his ex-wife in divorce settlement

Gave $10,000 to Wendy Davis campaign

Paid his niece’s UT tuition, of $30,000 directly to UT

Gave his mother a new car valued at $63,000

Gave his brother, Sam, $10,000 when he lost his job

Gave his brother, Sam, his fishing boat, valued at $5,000

What is $50,000?

Mrs. Wynn’s taxable estate if she died in 2013, with total assets of $25 million (had never given lifetime

gifts) and:

Left $5,000,000 in a trust for her nephew

Left $2,000,000 to her favorite charity

Left a house, valued at $10,000,000 to her sister

And left the remaining assets to her husband

What is $9,750,000?

Your advice to Alice (in 25% tax bracket) is to collect from her ex-husband:

$1,500 alimony per month for 5 years

$1,200 child support per month for 5 years

What is the child support of $1,200 per month?

The taxes from below that will be deducted on Schedule A as an itemized deduction:

Real estate taxes on rental house $3,000

Sales taxes paid $1,200

½ self-employment taxes $17,000

State income taxes paid $4,500

Real estate taxes paid on primary residence $6,000

Personal property taxes on personal use boat $1,000

What is $11,500?

Tax loss for Janet (whose AGI is $200,000) when:

Jewelry originally purchased and valued at $50,000 was stolen

Insurance paid her $20,000

What is $9,900?

Make your wager

Jeff (single) has $246,000 AGI, comprised of

Salary $180,000

Interest income $12,000

Capital gains $30,000

Net income from Passive Activity $24,000

Jeff’s Net Investment Income Tax (healthcare tax on unearned income) is __________________

What is $1,748?