Project Accounting Federal Tax Income

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Charley is age 64. He earned $55,000 in 2018 at his job for the New York Mets. (They can’t afford to pay him more since they stink.) Fortunately, they could provide benefits for him including health insurance. He is married to a 66 year old woman who does not work. They earned $1,000 in dividends and $5,000 of interest. One-half of that interest was from municipal bonds.

Charley also had a side business restoring old cars. He purchased $10,000 of old junky cars, purchased additional parts of $5,000, and sold the restored cars for $25,000. Charley also purchased a car lift used exclusively for his business for $11.000 in April, 2019.

Charley sold his personal car that had an adjusted basis of $18,000 for $19,000. This was a personal asset. He had the car for ten years. Charley sold Apple stock with a basis of $10,000 to his son for $8,000. Charley held that stock for three years. Charley’s wife inherited property from her sister was a basis of $10,000. Included in that property was some stock. The value of the stock was $11,000 at the date of the sister’s death. She sold it for $12,000. The spouse knew the sister bought the stock for $5,000.

Charley and his wife paid $8,500 of interest on their home mortgage, made charitable contributions of $10,000, paid state income tax of $7,000, paid federal income taxes of $12,000 and medical expenses of $800.

Charley liked to bet on the ponies at Monmouth Race Track. He won $1,000 but bought racing tickets of $200. He made contributions to his IRA of $5,000. His wife took IRA distributions of $3,000 during the year. To complete their golden retirement years, Charley and his wife both went back to school at night at Moravian College. They each paid $5,000 in tuition as part time students.

Charley did not make instalment payments. He did have $6,000 withheld from his paycheck. Will Charley have to pay at the end of the year? Will there be interest and penalties?

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