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Aca1 Task 2

Good Essays

A. The couple’s filing status should be Married Filing Jointly. A1. Married Filing Jointly would be the most beneficial for this couple because it will allow them to stay at a lower tax bracket and also qualify to take a higher standard deduction and higher deduction on the sale of their home than they would as individuals. The family can claim 5 exemptions: 1. Spouse A can take a personal exemption 2. Spouse B can take a personal exemption 3. The 10 year old is classified as a qualifying child and can be claimed as a dependent because they under 19 years of age and lived with the parents for the full year 4. The high school junior is classified as a qualifying child because he is under 19 years old and although Spouse B …show more content…

A2e. Passive activity is an activity in which an investor can earn profit from an activity in which he/she does not physically participate, including rentals and limited partnerships. In this scenario the couple has one rental property from which they received revenue that can be classified as passive income. The passive income has generated a net loss of $6,200. Since the couple has hired a realty company to manage their rental property then the loss must be carried over to the following year. These losses are reported on Form 8582. The $44,000 profit earned from the sale of the third rental property also needs to be reported but will be taxed as Long Term Capital Gains and will be entered as “Other gains or (losses)” using Form 4797. A3. The Income that will be reported for this couple will include the following: -Spouse B’s $8,000/month for 11 months of income from work because these are taxable wages that are paid to Spouse be for employment. - Spouse A’s partnership share of income is reported because in a partnership the partners are to report their share of their business on their individual return. - Spouse A’s $2,000 W-2 from the city park district is reported because as with spouse B’s wages, this is reported because these are wages paid to them for employment. - Dividends received from Spouse A’s investment into Company E is also included as income since the IRS states that dividends from investments is also taxable. -

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