ACA1 Task 2 task stream

Topics: Taxation in the United States, Tax, Taxation Pages: 5 (1661 words) Published: June 30, 2015
According to the Internal Revenue Service, a taxpayer has the choice between five different filing statues. The five statuses are, Single, Married Filing Separately, Married Filing Jointly, Head of Household, and Qualifying Widow(er) with dependent child.  For the couple in question, the recommendation I am making is that they use the filing status of married filing jointly. Since the couple has three children they will qualify for three dependency exemptions as well as two exemptions for themselves. Since all three of the children still live in the household and all of the children are under the age of nineteen the couple is allowed to claim them as dependents. On the other hand, the couple cannot claim spouse B’s mother since they did not supply over fifty percent of the support for her for the year they are filing.  The total amount of the mother’s living expense, including the cost of rent, food, and other expenses brings the total support to seven thousand dollars and the mother supplies the couple with $7920 a year. The money that she supplies is what she receives from her Social Security benefits. The reason that the couple should not file under the status married filing separately is because the tax rates are higher than the tax rates for those filing under the status married filing jointly.  Also, there several deductions, credits, and exclusions that are allowed for the status married filing jointly that are not allowed for those that are choosing to file separately. One example, is that the couple would only be able to deduct $250,000 of the income from the sale of the personal residence if they had filed separately, where if they choose to file jointly they will be allowed to excluded the entire amount of income from the sale. The definition of income, as stated by the Internal Revenue Service, is all income of the taxpayer whether it is taxable or non-taxable. The couple has several items that are considered as taxable income. Those items included, spouse A’s income from the partnership in Fan Company A of $142,000, the $2000 of income from the City Park referee job, the dividends for 2011 that spouse A received from Company E, the income that souse B received form the Controller job of $88,000, and the $5000 loss that spouse B incurred while they were unemployed. The couple also have items that fall under being considered as non-taxable income. Those items are, the child support that spouse B receives in the amount of $2400 for care of the child, the tax exempt interest payments received from Municipal Bonds in the amount of $900, and the $296,000 of income from the sale of the couple’s personal residence. There is an allowance to taxpayers of $250,000 exclusion on the sale of the taxpayers’ principal residence, and for couples that file under the status married filing jointly, the amount of the exclusion rises to $500,000. A profit on the sale of a capital asset is a capital gain, and a loss on the sale of a capital asset is a capital loss. There are short-term capital gains and losses and there are long-term capital gains and losses. A short-term asset is an asset that has been in the taxpayers’ possession for less than a year, and a long-term asset is an asset that the taxpayer has held for more than a year. Initially it seems that the couple has a long-term capital gain in the amount of $44,000 for the year since they sold a rental property that the couple has held for four years that was purchased for $90,000 and they sold it for $134,000. The gain would be then added to the couple’s total income for the year. The couple had a short-term capital loss in the amount of $5,000 from the day trading that spouse B was involved while unemployed. The Internal Revenue Service only allows for a $3,000 capital loss per filing year, so the remaining $2,000 will need to be carried forward to the next filing year. The loss would be subtracted from the couple’s total income for the year. If the couple have a gain for...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • ACA1 Task 2 Essay
  • ACA1 Task 2 Complete Research Paper
  • aca1 task 302.2.3 Essay
  • JET 2 Task 2 Essay
  • supply chain task 2 Essay
  • Essay about unit 21 task 2
  • Essay about English Written Task 2
  • ACA1 TASK 3 Essay

Become a StudyMode Member

Sign Up - It's Free