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Adjusted Gross Income Calculation 2009 Single

Carmin Kovach is single and has two children from her previous marriage. Anika, 9, lives with Carmin. Julius, 11, lives with his father, Ray. Carmin pays alimony of $400/month to Ray. The payments are to continue until Julius reaches 18, when they will be reduced to $100. Carmin is 34 and employed as a nuclear engineer with Atom systems consultants, Inc. (ASCI). Her annual salary is $80,000, and ASCI has an extensive fringe benefits program for its employees. ASCI have a qualified pension plan that covers all employees. Under the plan, ASCI match any contribution to the plan up to 8% of the employees' annual salary. Carmin makes the maximum allowable contribution of $6400, and it is matched by ASCI.

ASCI provide medical coverage to all employees but not to their dependents. Carmin's medical coverage costs ASCI $3000 during the current year. She receives $980 in reimbursements for her medical costs. ASCI also provide employees with a flexible benefits plan. Carmin pays $3200 into the plan. She uses $2400 to purchase medical coverage for Anika. Her medical, dental, and optometry costs not covered by insurance total $1900; the flexible benefits plan reimburses her $800 for these costs.

ASCI also provide employees with group term life insurance of twice their annual salary, up to a maximum coverage of $150,000. Carmins' group term life insurance premiums cost $400. Because of the sensitive and sometimes dangerous nature of her work, ASCI also provide Carmin with a $300,000 whole life insurance policy. The whole life insurance policy cost $490.

Taking advantage of ASCI's educational assistance program, during the fall Carmin enrolls in two law school classes at a local university. ASCI pay her tuition, fees, books, and other course-related costs totaling $2,300.

Carmin also receives certain other fringe benefits not available to all employees. She receives free parking in the company's security garage that would normally cost $250/month. In addition, ASCI pay the $1,000 cost of her nuclear engineer's license and $600/year in professional association dues and professional magazine subscriptions. ASCI also pay Carmin's $900 dues to a health club that is located in the same building as her office.

Carmin routinely enters sweepstake contests. This year, she is notified that she has won $5,000 in breakfast cereal promotion. The prize is to be paid equally over 10 years. She receives the first payment Dec. 28, although she does not deposit the check in her checking account until Jan 3.

In Feb, Carmin's father dies. Social security pays her $600 as a survivors benefit. She also receives stock valued at $30,000 and her father's house, which has a value of $90,000, as her share of her father's estate.

Carmin rents out her fathers house on Aug 1. The monthly rent is $400, and the lease agreement is for 1 year. The lease requires the tenant to pay the first and last months rent and a $400 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On Aug 1, Carmin receives $1200 from the tenant per the terms of the lease agreement. In Nov, the plumbing freezes and several lines burst. The tenant has the repairs made and pays the $300 bill. In Dec, he reduces his rental payment to $100 to compensate for the pluming repairs. Carmin pays other deductible costs for the rental that total $2,680. The allowable depreciation on the rental house is $1080.

Carmin owns several other investments. She receives the following amounts (all in cash) from the stocks and bonds she owns:

General Dynamics common stock $300
City of Toronto bonds $1600
State of Nebraska bonds $400
New Jersey Economic development bonds $300
Grubstake Mining development stock $1,000

Carmin owns 1000 shares of Grubstake Mining development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding. Grubstake reports taxable income of $200,000 during the current year. Carmin sells the following securities during 2009:

Security Sale Date Purchase date Sales price Commission paid Basis
Nebraska 3/14/09 10/22/06 $1900 $80 $1710
Bonds
Cassil 10/18/09 2/19/09 $8900 $450 $9630
Corporation
Stock

Carmin purchase 500 shares of General Dynamics stock on July 22, 2006, at a cost of $2200. On June 15, 2009, she receives 50 shares of General Dynamics stock as a dividend. The fair market value of General Dynamics stock on June 15, 2009, was $3.50 per share.

Carmin slips on a wet spot in front of a computer store during the current year. She breaks her ankle and is unable to work for 2 weeks. She incurs $1300 in medical costs, all of which are paid by the owner of the store. The store also gives her $1000 for pain and suffering resulting from the injury. ASCI continue to pay her salary during the 2 weeks she misses because of the accident. ASCI's plan also pays her $1220 in disability pay for the time she is unable to work.

Calculate Carmin's adjusted gross income on her 2009 tax return.

a. Include a brief explanation of how you determined each item that affected adjusted gross income and any items you excluded from gross income. Your solution to the problem should contain a list of each item included in adjusted gross income and its amount, with the explanations attached.

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Calculate Carmin's adjusted gross income on her 2009 tax return.

a. Include a brief explanation of how you determined each item that affected adjusted gross income and any items you excluded from gross income. Your solution to the problem should contain a list of each item included in adjusted gross income and its amount, with the explanations attached.

The City of Toronto bonds are taxable, unless there is a specific treaty which I doubt so they are included income for $1,600.
The State of Nebraska bonds are not included in the Federal Income Tax, but will probably be included in state or local income tax.

The New ...

Solution Summary

This solution is a calculation of the Adjusted Gross Income for a single person with various items. Included are alimony, salary, pension plan, flexible spending account, group life insurance, medical, life insurance policy, fringe benefits, miscellaneous income, sytocks, bonds, rental property, municipal bonds, and sales of stocks and bonds.

$2.19