Tim and Monica Nelson are married, file a joint return
, and are your newest tax
clients. They provide you with the following information relation to their 2011 tax return
1. Tim works as a pediatrician for the county hospital. The W-2 form
he received from the hospital shows wages of $150,000 and the state income
tax withheld of $8,500.
2. Monica spends much of her time volunteering, but also works as a substitute teacher for the local schools
. During the year, she spent 900 hours volunteering. When she does not volunteer, she earns 8.00 per hour working as a substitute. The W-2 form she received from the school district shows total wages of $3,888 and state income tax withheld of $85.
3. On April 13, the couple paid $250 in state taxes with their 2010 state income tax return. The Nelson’s state and local sales taxes
in 2011 were $5,500
4. On December 18, the Nelsons donated a small building to the Boy Scouts of America. They purchased the building three years ago for $80,000. A professional appraiser determined that the fair market value of the home was $96,000 on December 12.
5. Tim and Monica both received corrective eye surgery, at a total cost of $3,000. They also paid $1,900 in health insurance premiums.
6. On June 1, the couple bought a car for $16,000, paying $4,000 down and borrowing $12,000. They paid $750 total interest
on the loan in 2011.
7. On June 10, the Nelsons took out a home equity loan of $20,000 to expand their home. They paid a total of $850 interest with their monthly payments on the loan.
8. The Nelsons paid a total of $2,300 interest on thier4 original home loan.
9. They sold stock in Cabinets, Inc. for $5,200, which they purchased for$7,900 in March of the current year. They also sold stock in the Outdoor Corporation of $12,500 which they purchased several years ago for $8,600.
10. Time incurred the following expenses related to his profession, none of which were reimbursed by his employer:
• Subscription to medical
• American Medical Association (AMA) Annual membership fee $250
11. During the year, the couple paid their former tax advisor $700 to prepare
their prior year tax return
12. The Nelsons do not have children, and they do not provide significant financial support to any family members.
Compute the Nelson’s taxable income
Answer each problem in detail with reasons, conclusion and results. Submit your anser in a Microsoft word document in not more than 200 words. Show step by step solutions for all calculations with proper tax forms