Paul Barrone is a graduate student at State University. His 10 year old son, Jam
ID: 2423785 • Letter: P
Question
Paul Barrone is a graduate student at State University. His 10 year old son, Jamie, lives with him, and Paul is Jamie’s sole support. Paul’s wife died in 2014, and Paul has not remarried. Paul received $320,000 of life insurance proceeds (related to his wife’s death) in early 2015 and immediately invested the entire amount as shown below: Date Selling Dividends/ Item Acquired Cost Date Sold Price Interest 1,000 shares Blue 01/23/15 $14,000 12/03/15 $3,500 None 400 shares Magenta 01/23/15 23,000 $750 600 shares Orange 01/23/15 230,000 $2,300 100 shares Brown 06/23/09 2,800 01/23/15 14,000 None Green Bonds 01/23/15 23,000 $1,200 Gold Money market Account 01/23/15 30,000 $600 Paul had $42,000 of taxable graduate assistant earnings from State University and received a $10,000 scholarship. He used $8,000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie’s day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. Paul received a statement related to the Green bonds saying that there was $45 of original issue discount amortization during 2015. Paul maintains the receipts for the sales taxes he paid of $735. Paul lives at 1610 Cherry Lane, Bradenton, FL 34212, and his social security number is 111-11-1111. Jamie’s Social Security number is 123-45-6789. The university withheld $3,000 of Federal income tax from Paul’s salary. Paul is not itemizing his deductions. Part 1 – Tax Computation Compute Paul’s lowest tax liability for 2015 Part 2 – Tax Planning Paul is concerned because the Green bonds were worth only $18,000 at the end of 2015. $5,000 less than he paid for them. He is an inexperienced investor and wants to know if this $5,000 is deductible. The bonds had original issue discount of $2,00 when he purchased them, and he is curious about how that affects his investment in the bonds. The bonds had 20 years left to maturity when he purchased them. Draft a brief letter to Paul explaining how handle these items. Also prepare a memo for Paul’s tax file.
Explanation / Answer
Dear
you can handle these items what can i send to you. you can pay the interest of the cost Data sold Price 1000 and Blue shares has paid as per the date 01/23/15 $14,000 12/03/15 $3,500 and 400 shares for Magenta 01/23/15 23,000 $750 600 sharesand Orange 01/23/15 230,000 $2,300and 100 shares Brown 06/23/09 2,800 01/23/15 14,000 and Green Bonds 01/23/15 23,000 $1,200 Gold Money market Account 01/23/15 30,000 $600 and i had $42,000 of taxable graduate assistant earnings from State University and i received a $10,000 scholarship. I used $8,000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie’s day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. l received a statement related to the Green bonds saying that there was $45 of original issue discount amortization during 2015. l maintains the receipts for the sales taxes he paid of $735. I lives at 1610 Cherry Lane, Bradenton, FL 34212, and my social security number is 111-11-1111. Jamie’s Social Security number is 123-45-6789. The university withheld $3,000 of Federal income tax from Paul’s salary. I also purchased a bonds its maturity period is 20 years left.
MEMO FOR TAX FILE
sales tax liability $735 in 2015.
Green bonds $6934 at the end of 2015.
The Investment must be increased at the time ot the maturity of the bonds.