Calculate Their Net Capital Gain Or Loss? What Expenses Are

Question

Calculate their net capital gain/(loss)? (2) What expenses are not deductible for tax purposes? Tom and Geri Jones are married filing jointly in Milwaukee, Wisconsin, with a combined gross income that includes wages, interest, dividends, and capital gains/losses. Their gross income details are provided: wages of $75,250, interest received of $850, tax-exempt interest of $250, dividends of $1,500, and capital transactions resulting in a short-term loss of $5,500 and a long-term gain of $600. They also paid various deductible expenses, such as mortgage interest, property taxes, IRA contributions, and charitable contributions, among others. Their total deductions are compared between itemized deductions and the standard deduction, and their tax liability is calculated considering the applicable credits and payments. The assignment involves calculating their net capital gain or loss, identifying non-deductible expenses, comparing deduction options, computing their tax owed or refund, and explaining the calculations in a structured manner.

Dr. Jack HW Helper · Accepted Answer

The analysis of Tom and Geri Jones's 2011 federal income tax return highlights key aspects essential for understanding their tax position and the applicable tax calculations. The primary focus is on calculating their net capital gain or loss, identifying expenses that are not deductible for tax purposes, comparing itemized and standard deductions, and finally, determining whether they owe additional taxes or are entitled to a refund. Net Capital Gain/Loss Calculation Capital gains and losses are critical components in computing taxable income. The Joneses experienced a short-term capital loss of $5,500 and a long-term capital gain of $600 during 2011. To determine the net capital gain or loss, these amounts are combined: the loss of $5,500 offsets the gain of $600, resulting in a net capital loss of $4,900. This loss can be used to offset ordinary income up to a limit of $3,000 per year, with the remaining $1,900 carryforwarded to future years, as per IRS regulations (IRS, 2011). Therefore, their net capital loss for 2011 is $3,000 deductible, assuming they have sufficient ordinary income to offset, and the remaining $1,900 can be carried forward. Expenses Not Deductible for Tax Purposes Reviewing the expenses incurred by the Joneses reveals several that are nondeductible under IRS guidelines. Notably, personal expenses such as interest paid on credit cards ($150), the interest on a car loan ($470), and job-related expenses ($475) are generally nondeductible for taxpayers who do not qualify for specific exceptions (IRS, 2011). Additionally, unreimbursed medical expenses of $5,300 are deductible only to the extent that they exceed 7.5% of adjusted gross income (AGI), which necessitates confirming their AGI. Since their AGI is $64,000, the deductible medical expenses are calculated as $5,300 - (0.075 * $64,000) = $5,300 - $4,800 = $500 (IRS, 2011). Only this $500 qualifies as a deductible expense. Expenses like interest paid on credit cards and personal automobile int

Calculate Their Net Capital Gain Or Loss? What Expenses Are

Calculate their net capital gain/(loss)? (2) What expenses are not deductible for tax purposes?

Paper For Above instruction

Net Capital Gain/Loss Calculation

Expenses Not Deductible for Tax Purposes

Itemized Deductions vs. Standard Deduction

Tax Calculation and Refund/Tax Due

Conclusion

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