Louis and Sandy Roman were married with two children, Eddie, age 13, and Nancy, age 20.On July 7, 2012, Louis died.Nancy is a full-time student at the state university.The Romans own their own home and live in Denver.Louis had been disabled since 2004.Sandy is an insurance adjuster and sings in her church choir.
Assume for the 2012 tax year, the Roman family had various items of income and expenditures, as listed below.Determine either the amount of income, or the adjustment to income, that should be included or deducted on the Romans' Form 1040—Individual Income Tax Return, to arrive at adjusted gross income.Insert the appropriate items of income(lines 7 through 21) and the appropriate adjustments to income (lines 23 through 35) in the spreadsheet below.The total of items of income and adjustments to income will be displayed on lines 22 and 36, respectively.Adjusted gross income will also display on line 37. If a cell should be left empty, enter NA.
- The Romans received a $200 state income tax refund of the prior year's tax.The Romans had deducted $2,000 of state income taxes in the prior year, all of which resulted in federal tax savings.
- The Romans received a $1,000 federal tax refund of the prior year's tax.The Romans had paid $4,000 of federal income tax in the prior year.
- Louis received $5,000 of qualified cash dividends from a corporation listed on the New York Stock Exchange and received $500 of interest from a bank savings account.
- Sandy received $4,000 of tax-exempt interest.
- Sandy's federal taxable wages reported on Form W-2 amounted to $50,000.
- Sandy contributed $3,000 to a traditional IRA account.
- Louis paid a $25 penalty on a premature withdrawal of a certificate of deposit.
- Sandy paid $500 of self-employment tax on her choir net income of which 57.51% is deductible.
- Sandy is the sole owner of rental real estate on which current year income exceeded expenses by $6,000 as reported on Schedule E.The Romans had no other income on losses from passive activities.Sandy actively participates in managing the property.
- The Romans paid $6,500 of real estate taxes on their personal residence.
- Eddie and Nancy each received a $5,000 gift from their wealthy uncle.