Tax Treatments For Individual Returns

e) Yes, there may be an indirect benefit to John if he makes a $15,000 investment into Jane's business if John and Jane file “Married filing jointly tax return”. Jane must use the $15,000 for business deductible purchases. If the money sits in the bank it will not provide a tax benefit.

Should Darin’s income be included in the computation of support? Is the amount of $21,000 that Andrea used to purchase a new vehicle includable in the support test? Is the amount of student loan that Morgan obtained considered self-support?

- Dividends received from Spouse A’s investment into Company E is also included as income since the IRS states that dividends from investments is also taxable.

The other option afforded to the Ouray’s is to file separately as a married couple. Filing separately can be advantages under special circumstances. However, if the couple was to file separately, there are several restrictions. First being, that if one spouse cannot demonstrate more than one-half of a child’s support is provided by them, a multiple-support agreement must be filed. Next, if one taxpayer itemizes their deductions they must both take itemized deduction and same goes if one person takes a standard deduction, the other must as well. If filing status was to be separate, neither spouse can claim the earned income credit and the credit for child and dependent care expenses. Next, no deduction is allowed for the interest paid on educations loans, and only $1,500 of excess capital losses can be claimed by each person.

Assuming Jackie’s husband passed away within the calendar year, Jackie can elect to file a single/surviving spouse or joint return. According to Section 86 of the Standard Federal Tax Reporter, if Jackie elects to file an individual return, her base amount and adjusted base amount are $25,000 and $34,000, respectively. If she instead elects to file a joint return, her base amount and adjusted base amount are $32,000 and $44,000, respectively.

How is the child support amount calculated? The Child Support Guidelines are administered by the States and they vary from one state to another. The Guidelines are a little murky if one (or both) of the spouses are independent business owners that have control over their income. In such cases, a financial or tax professional will be able to help to figure out the real potential income of both spouses. Is there a need to go to court? If you are unable to reach an agreement, then going to court is necessary. A judge will hear the case once a court date has been set. In the USA, less than 2% of divorce cases ever proceed to trial. What is a QDRO and do I actually require one? A Qualified Domestic Relations Order (QDRO) is an official document that

US code defines gross income in 26 U.S.C § 61 as “income means all income from whatever source derived, including (but not limited to)…”

Jane’s handcrafted jewelry would likely be classified as a business. The reason this is true is because to be classified as a business one must engage in the activity with the motive of turning a profit. (Doggett v. Burrett, 3 ustc ¶1090, 12 AFTR 505, 65 F.2d 192 (CA-D.C., 1933)

Unfortunately, the couple failed to take advantage of tax planning. If Carol and Bob had moved to the smaller home and made it their primary residence, they could have fixed it up, realized more money from the sale and avoided capital gains on $500,000 when selling a primary residence. Instead, Carol sold the home for $400,000 and had to pay capital gains on $50,000 over the $250,000 exemption for a single taxpayer. The home was originally valued at $100,000, so the sale generated a $300,000 gain.

What are the expected dividend yield and capital gains yield during the fourth year (from Year 3 to Year 4)?

Since Mr. and Mrs. Green intend on having joint custody of the children, it looks as if all aspects of rearing the children, including expenses as well as decision-making would be shared among the parents. Although it is "shared", that does not signify that it will be equally shared. The court will determine, based on the formula contained in the Kentucky Child Support Guidelines, what each parent pays. Furthermore, since Mrs. Green is without income as a homemaker, it seems as though some sort of child support payment should be paid in regards to the children while they are residing in her home. Also, if Mr. Green takes a job, earning less income due to health problems, this may affect the amount of child support he would be obligated to pay, but it shouldn't keep him from being required to pay some sort of child support. This job change can cause the court to deviate from the guidelines. However, the court may look at Mrs. Green's unemployment as being voluntary. Thus, the court may not use that issue in determining the child support Mr. Green should be obligated to pay. The court will probably not order Mrs. Green to obtain employment, but in looking at the facts, there is no valid reason as to her unemployment, and it may be in the

For instance, those still living within the same home as their former spouse would not qualify for a tax deduction.

In order to claim the personal exemption the taxpayer must not be available for another to claim as a dependent. This question is one of the first questions on the form, “Can your parents or someone else claim you or your spouse on their income tax return?” If the tax payer is married and are filing jointly, 2 personal exemptions are allowed, if neither can be claimed as dependents on another tax return.

Tax benefits- we have the marital tax deduction, and filing taxes jointly under the tax benefits. The marital tax deduction is the largest tax benefit a married couple can receive. In addition, one can transfer assets free from tax to the partner at any time. A spouse can leave assets to the other spouse with no estate subjection. On filing taxes jointly, it happens that if both spouses are high earners, they end up paying more taxes. However, if one stays at home while the other has a job then the marriage benefits to file jointly.

One of the first steps in creating a tax plan is knowing the tax rate (Spiegelman, 2015). This can easily become complicated, tax rates vary with income and type of income. Ordinary income is taxed the most, ordinary income is income that is received from working wages, tips and self-employment. In 2015 the rates on this income ranges from 10% to 39.36% (Spiegelman, 2015). Knowing the tax bracket can assist in decisions in regards to investment decisions and charitable contribution decisions. Another major category of income is long-term capital gains, these are incomes from the sale of stocks, bonds and real estate. The range for this income is 15% to 23.8%, however the profit from the sale of art, coins or collectibles are taxed at 25% (Spiegelman, 2015).