Exercise 1: (Tax Return Problem). Bert and Barbara Longfelt support in nursing homes both Berts parents and Barbaras parents. Berts parents are 70 and 68 years of age respectively and have no income except for the $3,600 in Social Security they receive annually.

Exercise 1: (Tax Return Problem). Bert and Barbara Longfelt support in nursing homes both Berts parents and Barbaras parents. Berts parents are 70 and 68 years of age respectively and have no income except for the $3,600 in Social Security they receive annually.

Barbaras parents, both 72 years of age, have the following sources of income:Social Security$9,800Interest Income (Joint Ownership)$2,600Dividend Income$900Berts annual salary is $45,000 and his wifes annual salary is $55,000.They have two small children who live at home. Also, they own an apartment house from which they derive $6,000 net rental income. Two items from their rental property confused them so they did not include them in their rental income:Security deposits received and to be used against final months rent$500Two tenants paid rent in advance in December 2015. The rent was due January 1, 2016$600Barbara owned stock prior to her marriage to Bert and received the following cash dividends:General Corp. nonqualified common stock dividend (U.S. corporation)$300Live Forever Life Insurance Co. (dividends on life insurance policy)$100Bert and Barbara have several sources of interest income:Interest income from savings accounts$850Interest income from State of Tennessee Highway Bonds$400Barbara entered the local area bake-off, won first place for her cherry pie, and received a $1,000 cash prize.Bert, who is an accountant, made an arrangement with Harold the dentist. Bert would do Harolds tax work if Harold would take care of Bert and his familys dental work. During the year, Bert estimated that the value of his services to Harold was $500 and that Harold gave Bert and his family $600 worth of dental services. In December, Bert did a consulting assignment on a weekend and received $700. No Social Security or taxes were withheld.During the year, they had $15,000 withheld for federal taxes.During 2015, Bert and Barbara have $14,000 of itemized deductions. Compute Bert and Barbaras net tax due, including self-employment tax. Assume dividends are taxed at ordinary rates.Exercise 1: (Tax Return Problem). Bert and Barbara Longfelt support in nursing homes both Berts parents and Barbaras parents. Berts parents are 70 and 68 years of age respectively and have no income except for the $3,600 in Social Security they receive annually. Barbaras parents, both 72 years of age, have the following sources of income:Social Security$9,800Interest Income (Joint Ownership)$2,600Dividend Income$900Berts annual salary is $45,000 and his wifes annual salary is $55,000.They have two small children who live at home. Also, they own an apartment house from which they derive $6,000 net rental income. Two items from their rental property confused them so they did not include them in their rental income:Security deposits received and to be used against final months rent$500Two tenants paid rent in advance in December 2015. The rent was due January 1, 2016$600Barbara owned stock prior to her marriage to Bert and received the following cash dividends:General Corp. nonqualified common stock dividend (U.S. corporation)$300Live Forever Life Insurance Co. (dividends on life insurance policy)$100Bert and Barbara have several sources of interest income:Interest income from savings accounts$850Interest income from State of Tennessee Highway Bonds$400Barbara entered the local area bake-off, won first place for her cherry pie, and received a $1,000 cash prize.Bert, who is an accountant, made an arrangement with Harold the dentist. Bert would do Harolds tax work if Harold would take care of Bert and his familys dental work. During the year, Bert estimated that the value of his services to Harold was $500 and that Harold gave Bert and his family $600 worth of dental services. In December, Bert did a consulting assignment on a weekend and received $700. No Social Security or taxes were withheld.During the year, they had $15,000 withheld for federal taxes.During 2015, Bert and Barbara have $14,000 of itemized deductions. Compute Bert and Barbaras net tax due, including self-employment tax. Assume dividends are taxed at ordinary rates.

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