# Tax Return 2 Explanations

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Explanations Form 1040 Line 1a) Wages \$130000 Janice + \$35000 Richard = \$165,000 Line 7) Capital loss of \$6000, but capped at the \$3,000 limit Stock Sales Purchase Price Selling Price G/L LMN Stock 4,000 7,000 3,000 Gain LT, preferential rate QRS Stock 9,000 2,000 7,000 Loss ST, ordinary rate TUV Stock 5,500 3,500 2,000 Loss ST, ordinary rate NET G/L 6,000 Capital Loss Line 9) \$210,945 = 165,000+1,545-3,000+47,400 Line 11) \$206,613 AGI = \$210,945 total income - \$4,332 (line 10) Line 12) Itemized deductions of \$27,700 from Schedule A Line 13) \$7,968 *37,900 + 3,500 - 1,562 = 39,838 *39,838 * 0.2 = 7,967.6 (round to dollar) Line 14) \$35,668 = \$27,700 + \$7,968 Line 15) \$170,945 = \$206,613-\$35,668 Line 16) [(170,945-83,550)*22% +9,615] = \$28,841.9 rounded to \$28,842 Line 23) \$3,123 SE tax Line 24) \$31,965 = 3,123+28,842 Line 37) \$31,965 (line24) - \$30,000 (line 33) = \$1,965 amount you owe Schedule 1 Line 3) \$37,900 from Schedule C line 31 Line 5) \$3,500
Level 1: Basis Level ABC LLP DEF LLP Actual income/ loss \$6,000 \$(6,500) Beg Basis \$2,000 \$5,500 + Income \$6,000 - + Contribution - - - Distribution \$(5,000) \$3,000 Subtotal \$3,000 \$2.500 - Loses \$(2,500) End Basis \$3,000 - Amount that flows to Level 2 \$6,000 \$(2,500) Suspended carryforward losses \$4,000 Level 2: Passive Level ABC LLP DEF LLP From level 1 \$6,000 \$(2,500) ABC LLP \$6,000 DEF LLP \$(2,500) Net Amount \$ 3,500 Taxable Incom from passive investment \$3,500 Line 10) 37900+3500+6000 = \$47,400 Line 15) \$1,562 SE Tax calculation Step #1 37,900 Step #2 35,000.65 37900 * 0.9235 Step #3 1,015.01885 35000.65 * 0.029 Step #4 2,108 147,000-130,000 = 17,000 → Fica cap is less than step 2 17,000 * 12.4% = 2,108 Step #5 3,123 1015.01885+2108 = 3123.01885 (round to dollar) Step #6 \$1,562 3123*0.5 = 1561.5(round to nearest dollar) Line 20) \$2,770 Traditional IRA
MAGI = Total Income - 50% of SE tax = 210945-1562 = 209,383 Spousal IRA applies, Phase out range is 204k to 214k = 10,000 (214k-204k). AGI: (209,383-204k) / 10,000 = 0.5383 phaseout % 0.5383 * 6k = 3229.8 phased out portion 6k-3229.8 = 2770.2 ≅ \$2,770 allowable deduction Line 26) \$4,332 = 1,562 + 2,770 Schedule 2 Line 4) \$3,123 SE tax Schedule A Line 5e) \$10,000 : \$10,000 is less than \$17,500 Line 17) \$27,700 = 10,000 + 10,700 + 7,000 Schedule C Line 1) \$69,500 self employed income Line 7) \$69,500 gross income Line 24b) \$1,200= \$600 meals while business travel + \$600 meals while meeting with clients Line 28) \$31,600 = \$4,500 (line 15) +\$15,000 (line 20b) + \$1,800 (line 22) + \$1,100 (line 24a) + \$1,200 (line 24b) + \$8,000 (line 25) Line 29) \$37,900 = \$69,500 (line 7) - \$31,600 (line 28) Line 31) \$37,900 net profit Additionally, (5) Average Self Employment Tax rate = 3,123 / 37,900 = 8.24% It is below the 15.3% nominal rate. 12.4% Social Security tax and a 2.9% Medicare tax. (6) \$7,000 donation to charitable organizations decreases their taxable income by \$7,000. This saves them #.