Tax Item
Amount
Daniel’s Earnings
$100,000
Delilah’s Earnings
$105,000
Federal Tax Withholdings
$22,700
State Income Tax Withholdings
$10,750
FICA & M/C
$15,683
Savings Account Interest (2.5% per year)
$1,800
State Refund from Prior Year
$1,200
Home Mortgage Interest Paid
$12,500
Real Estate Taxes Paid
$15,500
Charitable Contributions
$1,500
Unreimbursed Medical Expenses
$800
Stock Ownership: Union Motor Company (purchased 9 months ago & which they still hold)
Current Value: $4,000
Cost basis: $8,000
Whole Life Insurance Policy
Face Value: $100,000
Cash Value: $8,800
Owner: Daniel
Beneficiary: Delilah
Insured: Daniel
Policy Dividend: $300
The Westerfields itemized deductions for their federal return last year. Currently, neither Delilah nor Daniel has access to a qualified retirement plan through their work and they have not funded IRAs up to this point in time. They have access to a Section 125 flexible spending account through Delilah’s employer. To date, they have not funded the account. Open enrollment is coming up and lasts for the next 30 days. For purposes of solving this case, use the tax information shown below.
MARRIED FILING JOINTLY
Taxable Income
Tax on Lower Amount
Tax Rate on Excess
$0 – $18,550
$0
10.0%
18,551 – 75,300
1,855
15.0%
75,301 – 151,900
10,367.50
25.0%
151,901 – 231,450
29,517.50
28.0%
231,451 – 413,350
51,791.50
33.0%
413,351 – 466,950
111,818.50
35.0%
466,951,000 – . . .
130,578.50
39.6%
Standard Deduction
12,600
Personal Exemption
4,050
Please use this data to answer the questions in the Case Analysis. Show all formulas and computations. Justify all your responses completely.
1. Compute the Westerfield’s AGI. Show your work.
