ACA 1 Task 2 Answer
ACA1 Tax Treatments for Individual Returns (Task 302.2.3)
Use the following format for your essay. It is based on the grading rubric structure. Identify the item in the appropriate rubric area and then present your reasoning in a paragraph for each tax decision you have made. Use as much space as necessary in each category. (The task instructions give a suggested total length of 2-5 pages.
A. Recommended Tax Filing Status
The recommended tax filing status for this family is Married Filing Jointly. The reason I would recommend this filing status is that there are three children that are qualifying children, but the college freshman is not under the age of 17 so that child does not qualify for the child tax credit. Spouse B’s mother does not qualify as a dependant because she does not meet the minimum requirement of having half of her support come from the family. The family would be able to take a higher amount of deductions and therefore pay less in taxes if they choose Married Filing Jointly. By filing jointly the couple is able to take advantages of such credits as the child tax credit, the Lifetime Learning Credit & the hope credit. They are also able to save more into retirement plans than they would have been filing separately.
A2a. Taxable and Non-Taxable Income
Spouse A’s income from his K-1 from Fan Company A is taxable income. Spouse A’s cash withdrawals are not taxable because they are accounted for on his K-1 as part of his income from the partnership.
Spouse A’s income as a part time referee is taxable. Spouse B’s earnings as the controller for the electronics firm are taxable.
Dividends from Company E stocks are taxable.
The interest from the municipal bond is non-taxable.
The losses that Spouse B suffered from day trading would be an offset against all other taxable income and would need to be reported on Form 8949 and Schedule D.
The income from the rental properties would be taxable.
The gain from selling their home is
Use the following format for your essay. It is based on the grading rubric structure. Identify the item in the appropriate rubric area and then present your reasoning in a paragraph for each tax decision you have made. Use as much space as necessary in each category. (The task instructions give a suggested total length of 2-5 pages.
A. Recommended Tax Filing Status
The recommended tax filing status for this family is Married Filing Jointly. The reason I would recommend this filing status is that there are three children that are qualifying children, but the college freshman is not under the age of 17 so that child does not qualify for the child tax credit. Spouse B’s mother does not qualify as a dependant because she does not meet the minimum requirement of having half of her support come from the family. The family would be able to take a higher amount of deductions and therefore pay less in taxes if they choose Married Filing Jointly. By filing jointly the couple is able to take advantages of such credits as the child tax credit, the Lifetime Learning Credit & the hope credit. They are also able to save more into retirement plans than they would have been filing separately.
A2a. Taxable and Non-Taxable Income
Spouse A’s income from his K-1 from Fan Company A is taxable income. Spouse A’s cash withdrawals are not taxable because they are accounted for on his K-1 as part of his income from the partnership.
Spouse A’s income as a part time referee is taxable. Spouse B’s earnings as the controller for the electronics firm are taxable.
Dividends from Company E stocks are taxable.
The interest from the municipal bond is non-taxable.
The losses that Spouse B suffered from day trading would be an offset against all other taxable income and would need to be reported on Form 8949 and Schedule D.
The income from the rental properties would be taxable.
The gain from selling their home is