Aca Task 302.2.3-01-08 Essay

1644 Words Jul 7th, 2014 7 Pages
1. The most advantageous filing status for spouse A and spouse B to use is married filing jointly. 1. Spouse A and B may only choose from the married filing jointly or married filing separately statuses. Under married filing separately the spouses would start accruing taxes against their income sooner. For example under married filing separately a spouse would only be able to earn $8,925.00 of taxable income before they would be progressed to the next tier of the income tax bracket. Under married filing jointly the spouses could earn $17,850.00 of taxable income before they would be progressed to the next tax bracket. These figures were based on the IRS income tax guidelines for the year 2013. (Phillips Erb). They will qualify for 2 …show more content…
4. In order for the personal residence to qualify for exclusion treatment under section 121 the residence must have been used as the principal residence for at least 2 years out of the last 5 years. Exceptions to this rule would be due to change in place of employment, or due to certain health considerations. The amount of exclusion on the sale of a personal residence is $250,000 for a single person or $500,000 for a married couple. As long as the realized gain does not exceed this then there is no recognized gain from the sale of the property. For the couple's home the calculations are as follows: Amount realized $430,000 minus the adjusted basis (includes the cost of the addition to the house) $134,000 is equal to realized gain of $296,000. Realized gain of $296,000 minus section 121 exclusion of $500,000 leaves the couple with no recognized gain on the sale of their personal residence 5. For Spouse A's Partnership income, the partnership reports the income to the IRS using form 1065. The partnership then provides a K-1 to the partner which lays out his partnership income amount. Per the case study Spouse A must report an income of $142,000 on their tax return using Schedule E. The fact that Spouse A withdrew $83,500 during the calendar year does not affect the amount of income Spouse A must report. 6. The IRS defines passive activity as any trade or business, which includes all rental activities) that produces income but the taxpayer does

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