Carmin Kovach is single and has two children from her previous marriage. Anika
9 lives with Carmin. Julius 11 lives with his father Ray. Carmin pays alimony of
$400 per month to Ray. The payments are to continue until Julius reaches age 18
when they will be reduced to $100.
Carmin is 34 and employed as a nuclear engineer with Atom Systems Consultants
Inc. (ASCI). Her annual salary is $80000 and ASCI has an extensive fringe
benefits program for its employees.
ASCI has a qualified pension plan that covers all employees. Under the plan
ASCI matches any contribution to the plan up to 8% of the employees annual salary.
Carmin makes the maximum allowable contribution of $6400 and it is
matched by ASCI.
ASCI provides medical coverage to all employees but not to their dependents.
Carmins medical coverage costs ASCI $3000 during the current year. She
receives $980 in reimbursements for her medical costs. ASCI also provides employees
with a flexible benefits plan. Carmin pays $2500 into the plan. She uses
$2400 to purchase medical coverage for Anika. Her medical dental and optometry
costs not covered by insurance total $1900; the flexible benefits plan reimburses
her $100 for these costs.
ASCI also provides employees with group term life insurance of twice their annual
salary up to a maximum coverage of $150000. Carmins group term life insurance
premiums cost $400. Because of the sensitive and sometimes dangerous
nature of her work ASCI also provides Carmin with a $300000 whole life insurance
policy. The whole life insurance policy costs $490.
Taking advantage of ASCIs educational assistance program during the fall
Carmin enrolls in two law school classes at a local university. ASCI pays her tuition
fees books and other course-related costs totaling $2300.
Carmin also receives certain other fringe benefits not available to all employees.
She receives free parking in the companys security garage that would normally
cost $280 per month. In addition ASCI pays the $1000 cost of her nuclear engineers
license and $600 per year in professional association dues and professional
magazine subscriptions. ASCI also pays Carmins $900 dues to a health club that is
located in the same building as her office.
Carmin routinely enters sweepstakes contests. This year she is notified that
she has won $5000 in a breakfast cereal promotion. The prize is to be paid equally
over 10 years. She receives the first payment December 28 although she doesnt
deposit the check in her checking account until January 3.
In February Carmins father dies. Social Security pays her $600 as a survivors
benefit. She also receives stock valued at $30000 and her fathers house which
has a value of $90000 as her share of her fathers estate.
Carmin rents out her fathers house on August 1. The monthly rent is $400
and the lease agreement is for one year. The lease requires the tenant to pay the first
and last months rent and a $400 security deposit. The security deposit is to be
returned at the end of the lease if the property is in good condition. On August 1
Carmin receives $1200 from the tenant per the terms of the lease agreement. In
November the plumbing freezes and several lines burst. The tenant has the repairs
made and pays the $300 bill. In December he reduces his rental payment to $100
to compensate for the plumbing repairs. Carmin pays other deductible costs for the
rental that total $2680. The allowable depreciation on the rental house is $1080.
Carmin owns several other investments. She receives the following amounts
(all in cash) from the stocks and bonds she owns:
General Dynamics common stock $ 300
City of Toronto bonds 1600
State of Nebraska bonds 400
New Jersey economic development bonds 300
Grubstake Mining Development stock 1000
Carmin owns 1000 shares of Grubstake Mining Development common stock.
Grubstake is organized as an S corporation and has 100000 shares outstanding.
Grubstake reports taxable income of $200000 during the current year.
Carmin sells the following securities during 2013:
Security Sale Date
Purchase
Date
Sale
Price
Commission
Paid Basis
Nebraska Bonds 3/14/13 10/22/10 $1900 $ 80 $1710
Cassill Corporation
Stock
10/18/13 2/19/13 $8900 $450 $9630
Carmin purchased 500 shares of General Dynamics stock on July 22 2010 at
a cost of $2200. On June 15 2013 she receives 50 shares of General Dynamics
stock as a dividend. The fair market value of General Dynamics stock on June 15
2013 was $3.50 per share.
Carmin slips on a wet spot in front of a computer store during the current
year. She breaks her ankle and is unable to work for two weeks. She incurs $1300
in medical costs all of which are paid by the owner of the store. The store also
gives her $1000 for pain and suffering resulting from the injury. ASCI continues
to pay her salary during the two weeks she misses because of the accident. ASCIs
plan also pays her $1200 in disability pay for the time she is unable to work.
Calculate Carmins adjusted gross income on her 2013 tax return. Then do
one or both of the following according to your professors instructions:
a. Include a brief explanation of how you determined each item that affected
adjusted gross income and any items you excluded from gross income. Your
solution to the problem should contain a list of each item included in adjusted
gross income and its amount with the explanations attached.
b. Write a letter to Carmin explaining how you determined each item that
affected adjusted gross income and any items you excluded from gross income.
You should include a list of each item included in adjusted gross income and
its amount.
MUST BE IN EXCEL AND EXCEL MUST BE USED CORRECTLY