Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2010. Alfred and Beulah will file a joint return for 2012. Alfred’s Social Security number is 111 –11 – 1111. Beulah’s Social Security number is 123 –45 –6789, and she adopted “Old” as her married name. They live at 211 Brick stone Drive, Atlanta, GA 30304.
Alfred was divorced from Sarah Old in March 2009. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for next 10 years or till Sarah’s death, whichever occurs first. Alfred pays Sarah $15,000 in 2012. Additionally, in January 2012, Alfred pays Sarah $50,000, which is designated as being for her share of marital property. Also, Alfred is responsible for all prior years’ income taxes. Sarah’s Social Security number is 123 –45 –6788. Alfred’s salary for 2012 is $150,000, and his employer, Cherry, Inc. (Federal I.D. No. 98 –7654321), provides him with group term life insurance equal to $30,000. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes.
The subsequent amounts were withdrawn for FICA taxes: $4,486 for Social Security and $2,175 for Medicare.
Beulah recently graduated from law school and is employed through Legal Aid Society, Inc. (Federal I.D. No. 11 –1111111), as a public defender. She acquires a salary of $40,000 in 2012. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The subsequent amounts were withheld for FICA taxes: $1,680 for Social Security and $580 for Medicare.
Beulah has $2,500 in qualified dividends on Yellow Corporation stock she inherited. In 2012, Alfred and Beulah received a $1,900 refund on their 2011 state income taxes. They enumerated deductions on their 2011 Federal income tax return (total = $15,000). Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2012. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400 for which they maintain the receipts.
Calculate the Olds’ net tax payable (or refund due) for 2012. For full credit you should use the applicable tax forms and proper schedules. You should also show your total computations for: Gross Income; Adjusted Gross Income; and Taxable Income.