Charlotte (age 40) is a surviving spouse and provides all of the support of her four minor children who live with her. She also maintains the household in which her parents live and furnished 60% of their support. Besides interest on City of Miami bonds in the amount of $5,500, Charlotte%u2019s father received $2,400 from a part- time job. Charlotte has a salary of $80,000, a short-term capital loss of $2,000, a cash prize of $4,000 from a church raffle, and itemized deductions of $10,500. Using the Tax Rate Schedules, compute the 2013 tax liability for Charlotte.
Each year, Tom and Cindy Bates normally have itemized deductions of $10,000, including a $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: in early January 2013, they pay their pledge for 2012; during 2013, they pay the pledge for 2013; and in late December 2013, they prepay their pledge for 2014. a. Explain what the Bates are trying to accomplish. b. What will be the tax saving if their marginal tax bracket is 25% for all three years? (Assume that the standard deduction amounts for 2013 and 2014 are the same.) c. Write a letter to Tom and Cindy Bates sum- marizing your analysi.