Meet Betty Ann & Bart Summerfield Tax Planning Clients Betty Ann (age 45) & Bart

ID: 2581863 • Letter: M

Question

Meet Betty Ann & Bart Summerfield

Tax Planning Clients

Betty Ann (age 45) & Bart (age 52) Summerfield have been married for 25 years and have one adult child, Alan, who is living on his own.

Betty Ann & Bart file joint tax returns. The table below summarizes their financial data for tax purposes. Use this information when you are answering the questions that follow.

Tax Item

Amount

Bart’s Earnings

$110,000

Betty Ann’s Earnings

$125,000

Federal Tax Withholdings

$22,700

State Income Tax Withholdings

$10,750

FICA & M/C

$17,978

Savings Account Interest (3.0% per year)

$3,200

State Refund from Prior Year

$2,425

Home Mortgage Interest Paid

$12,500

Real Estate Taxes Paid

$24,000

Charitable Contributions

$3,000

Unreimbursed Medical Expenses

$1,800

Stock Ownership: United Motor Company (purchased 9 months ago & which they still hold)

Current Value: $4,000

Cost basis: $8,000

Whole Life Insurance Policy

Face Value: $1,000,000

Cash Value: $15,000

Owner: Bart

Beneficiary: Betty Ann

Insured: Bart

Policy Dividend: $300

The Summerfields itemized deductions for their federal return last year. Currently, neither Betty Ann nor Bart has access to a qualified retirement plan through their work and they have not funded IRAs up to this point in time. They have access to a Section 125 flexible spending account through Betty Ann’s employer. To date, they have not funded the account. Open enrollment is coming up and lasts for the next 30 days. For purposes of solving this case, use the tax information shown in the Appendix.

Please use this data to answer the questions in the Case Analysis. Show all formulas and computations. Justify all your responses completely. The Tax Tables are attached in the Appendix.

Question:

1. Compute the Summerfield’s AGI. Show your work.?