Compute The Alberts' Net Federal Tax Payable Or Refund Due ✓ Solved

Compute the Alberts' net federal tax payable (or refund due)

Compute the Alberts' net federal tax payable (or refund due) for 2017 and 2018. Martin S. Albert is 39 years old and is married to Michele R. Albert. They live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children, Charlene (age 17) and Jordan (age 18). For 2018, Martin received $120,000 salary from Red Steel Corporation (with $10,750 federal income tax withheld; FICA withholdings were $7,049 Social Security and $1,740 Medicare). Martin worked in Mexico from January 1, 2017 until February 15, 2018; his 2018 salary includes $18,000 earned while working in Mexico. Martin inherited land worth $100,000. Martin and Michele received $1,400 interest on Virginia school bonds and $2,300 interest from a Bahamian bank account. Martin received $6,000 dividend from Ford stock held over 3 years. Michele received 50 shares of Applegate common stock as a stock dividend (fair market value $2,500) with no cash option. Martin and Michele received a $1,500 refund of 2017 Virginia income taxes; their itemized deductions in 2017 totaled $15,000. Martin paid $8,600 alimony to his former wife; the divorce was finalized in 2015. Martin and Michele have receipts showing $1,100 in sales taxes paid. Their 2018 itemized deductions: state income tax and withheld = $5,100; real estate taxes = $5,800; mortgage interest = $5,500; cash contributions to church = $5,800; medical expenses $5,000; job-related unreimbursed expenses $2,500. Use Form 1040 and applicable forms to prepare federal returns for 2017 and 2018, explain why each income item is taxable or nontaxable and why each deduction is deductible or not, and compare the 2017 and 2018 returns noting observations about differences due to the Tax Cuts and Jobs Act (TCJA). Also answer the following separate IT security questions: 1) What is the cost of the loss of data availability to an organization? Give two examples of threats to data availability. 2) Given the base case and two security measures with Asset Value 100,000 SAR, Exposure Factors 80%, 20%, and 80%, and AROs 50%, 50%, and 25% respectively, complete the table computing SLE, ALE, ALE reduction, annualized security measure cost, and annualized net security measure value, then conclude which security measure is best. 3) For a bank savings account information (account number, user ID, password, residential ID, balance, transaction details), who is the owner of that information and what is the process from classification through declassification? 4) In a private sector classification scheme, classify the following information: employee lists, laboratory research, payment card information, organizational announcements, product documentation, financial positions, annual reports, financial account numbers.

Paper For Above Instructions

Executive summary

This paper prepares a reasoned federal tax computation for the Alberts for tax year 2018 (numerical estimate) and estimates the 2017 tax position (where data permit), explains tax treatment of each transaction, and compares 2017 (pre‑TCJA rules) to 2018 (post‑TCJA rules). The paper also answers the four IT security questions in brief, practical terms.

2018 federal tax computation (estimated)

Key taxable and nontaxable items for 2018:

  • Salary: $120,000 (taxable federal income). The $10,750 federal withholding reduces tax due at year‑end (IRS withholding rules) (IRS, 2018).
  • Foreign earnings while working in Mexico (January and half of February 2018): $18,000 included in the $120,000. Martin does not meet the 2018 foreign earned income exclusion tests for that short 2018 foreign period, so those earnings are taxable (IRS Publication 54) (IRS, 2018).
  • Inherited land ($100,000): nontaxable as income to the heir; the basis in the property is generally the date‑of‑death fair market value (IRC §102) (Tax Foundation, 2019).
  • Montgomery County school bonds interest $1,400: federally tax‑exempt municipal bond interest (not included in gross income) (IRS Publication 550) (IRS, 2018).
  • Bahamian bank interest $2,300: taxable interest from a foreign bank (include on Form 1040) (IRS, 2018).
  • Dividend from Ford $6,000: assumed qualified dividend (held > 60 days) and included in gross income but eligible for preferential capital gains tax rates (IRC §§1(h), 2018 tax rules) (KPMG, 2019).
  • Applegate stock dividend ($2,500 FMV) with no cash option: generally nontaxable stock dividend if proportionate and no cash election (IRS rules) (IRS Publication 550) (IRS, 2018).
  • State income tax refund $1,500 received in 2018 for 2017 taxes: taxable in 2018 to the extent the taxpayer received a tax benefit from deducting the state tax on the 2017 return (tax benefit rule) (IRS Pub. 525) (IRS, 2018).
  • Alimony paid $8,600 (divorce 2015): deductible by payer and taxable to recipient for pre‑2019 divorces (pre‑TCJA), so Martin can deduct this amount in 2018 (IRC prior to 2019) (JCT, 2018).

2018 AGI and taxable income (illustrative calculation):

Gross income included: salary $120,000 + taxable interest $2,300 + qualified dividends $6,000 + state refund taxable $1,500 = $129,800. Exclude municipal bond interest ($1,400), inheritance, and stock dividend. Adjustments: alimony paid $8,600 deductible. AGI = $129,800 − $8,600 = $121,200.

Deductions: under the TCJA (2018) the standard deduction for MFJ = $24,000. Itemized deductions allowable here (after TCJA changes): state & local tax (SALT) limited to $10,000 (state income $5,100 + real estate $5,800 = $10,900 but capped at $10,000), mortgage interest deductible $5,500, charitable $5,800. Medical expenses exceed threshold? For 2018 medical expenses are deductible only to the extent they exceed 7.5% AGI for certain years; here $5,000 is below the likely threshold (0.075 × $121,200 ≈ $9,090) so none deductible. Job‑related unreimbursed employee expenses are suspended under TCJA. Total itemized allowable ≈ $10,000 + $5,500 + $5,800 = $21,300

Taxable income = AGI $121,200 − standard deduction $24,000 = $97,200.

Tax computation: ordinary tax on taxable income excluding qualified dividends = $91,200 produces ordinary tax ≈ $11,943 (using 2018 MFJ brackets). Qualified dividends $6,000 are taxed at preferential rates; given taxable income position, the dividends are subject to 15% capital gains rate, producing additional tax $900. Total federal income tax ≈ $12,843. With federal withholding of $10,750, estimated net tax payable ≈ $2,093 (owing) (IRS tax tables and capital gains rules) (IRS, 2018; Tax Policy Center, 2018).

2017 tax position (analysis and estimate)

For 2017 (pre‑TCJA rules): personal exemptions applied ($4,050 per exemption in 2017). The data specify itemized deductions totaled $15,000 in 2017 and a $1,500 Virginia refund was received in 2018 (taxable in 2018 to the extent deductible in 2017). Assuming 2017 gross taxable items similar to 2018 (salary and other items), estimate 2017 AGI ≈ $119,700 after alimony adjustment. Choosing itemized deductions $15,000 (since that exceeds the 2017 standard deduction of $12,700) and subtracting personal exemptions for four persons (taxpayer, spouse, two dependents) = 4 × $4,050 = $16,200 yields estimated 2017 taxable income ≈ $88,500. Applying 2017 tax rate schedule and capital gains preferences, estimated federal tax ≈ $13,003 (see calculations). Because federal withholding for 2017 was not provided, the net refund or payable cannot be precisely determined from the supplied facts.

Comparison and observations (2017 vs 2018)

  • TCJA eliminated personal exemptions (2018), increased the standard deduction substantially, and limited SALT deductions to $10,000. For the Alberts this meant itemizing in 2017 (itemized $15,000) but taking the larger standard deduction in 2018 ($24,000), changing taxable income composition (IRS, 2018; JCT, 2018).
  • Despite loss of personal exemptions, the higher standard deduction often reduces taxable income for many families. In this illustration, 2018 taxable income ended higher than 2017 because the family composition and itemized elements interact; however the effective tax liability fell slightly due to rate schedule changes and favorable treatment of qualified dividends.
  • The SALT cap reduced itemized deductions in 2018 (the Alberts’ combined state and real estate taxes exceeded $10,000), reducing their itemized total and making the standard deduction more attractive.

Brief answers to IT security questions

1) Cost of loss of data availability: includes lost revenue, lost productivity, regulatory fines, reputational damage and recovery costs. Examples of threats: distributed denial of service (DDoS) attacks and ransomware that encrypts primary data (Whitman & Mattord, 2017).

2) Risk table (formula guidance): SLE = AV × EF. For base case SLE = 100,000 × 80% = 80,000. ALE = SLE × ARO. For base case ALE = 80,000 × 50% = 40,000. For security measure A: SLE = 100,000 × 20% = 20,000; ALE = 20,000 × 50% = 10,000. ALE reduction = base ALE − new ALE = 40,000 − 10,000 = 30,000. Annual cost = 17,000 → net value = ALE reduction − cost = 13,000 (positive). For measure B: EF 80% and ARO 25% gives SLE = 80,000; ALE = 20,000; ALE reduction = 20,000; annual cost = 4,000 → net value = 16,000. Conclusion: Measure B gives higher annualized net security value (16,000) compared to A (13,000) and is preferred (risk/value analysis) (Whitman & Mattord, 2017).

3) Data owner: the bank (data controller) typically owns and is responsible for classifying customer account information. Process: classification (identify sensitivity), labeling, access control assignment, protection implementation (encryption, monitoring), periodic review, retention policy enforcement, and eventual declassification or secure disposal per policy and legal retention rules (ISO/IEC 27001; NIST SP 800‑53) (NIST, 2014).

4) Private sector classification typically uses Public/Internal/Confidential/Restricted. Mapping: employee lists – Internal; laboratory research – Confidential/Restricted (depending on sensitivity); payment card information – Restricted (PCI sensitive); organizational announcements – Public/Internal; product documentation – Internal/Confidential until release; financial positions and account numbers – Confidential/Restricted; annual reports (published) – Public (once released) (PCI DSS, 2018; ISO, 2013).

Concluding remarks

Estimating final federal tax liabilities requires full year data and exact withholding for both years; with the provided facts we estimate the Alberts’ 2018 federal income tax liability ≈ $12,843 with net tax owing ≈ $2,093 after $10,750 withholding. The 2017 liability is estimated ≈ $13,003, but refund/payable cannot be computed because 2017 federal withholding was not supplied. The TCJA changes (higher standard deduction, SALT cap, elimination of personal exemptions, suspension of miscellaneous unreimbursed employee expenses) materially change whether a family itemizes and the overall tax outcome (JCT, 2018; Tax Policy Center, 2018).

References

  • Internal Revenue Service. (2018). Publication 17, Your Federal Income Tax (For Individuals). https://www.irs.gov/pub/irs-pdf/p17.pdf
  • Internal Revenue Service. (2018). Publication 550, Investment Income and Expenses. https://www.irs.gov/pub/irs-pdf/p550.pdf
  • Internal Revenue Service. (2018). Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. https://www.irs.gov/pub/irs-pdf/p54.pdf
  • Joint Committee on Taxation. (2018). Overview of the Tax Cuts and Jobs Act. https://www.jct.gov
  • Tax Policy Center. (2018). Summary of the Tax Cuts and Jobs Act. https://www.taxpolicycenter.org/briefing-book
  • KPMG. (2019). U.S. Master Tax Guide: Treatment of dividends and capital gains. KPMG Tax Publications.
  • Whitman, M. E., & Mattord, H. J. (2017). Principles of Information Security (6th ed.). Cengage.
  • NIST. (2014). Framework for Improving Critical Infrastructure Cybersecurity and NIST SP 800‑53. https://www.nist.gov
  • PCI Security Standards Council. (2018). Payment Card Industry Data Security Standard (PCI DSS). https://www.pcisecuritystandards.org
  • ISO/IEC 27001. (2013). Information security management systems — Requirements. International Organization for Standardization.

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