Paul and Donna Decker are married taxpayers, ages 44 and 42, who file a joint return for 2014. Paul and Donna have two dependent children, Larry and...

Paul and Donna Decker are married taxpayers, ages 44 and 42, who file a joint return for 2014. Paul and Donna have two dependent children, Larry and Jane, ages 17 and 18. The couple also claims Paul's mother Hannah, age 66, as a depedent. Hannah received $7,500 in tax exempt social security and gave the Deckers $2,000 to help pay for her living expenses. The Deckers estimate that they paid $2,500 of their own money to pay for Hannah's support and estimate that, although Hannah does not pay rent, the rental value of her room would be $200 per month. Paul sold 300 shares of Acme Corporation stock for $50 per share on May 3, 2014. The Deckers had purchased the stock on April 29, 2006 for $25 per share. They received dividends of $750 on the stock a month before the sale. In July, Paul hit a submerged rock while boating. Although Paul was uninjured, the boat was destroyed. Paul had paid $25,000 for the boat in June 2010, and its value was appraised at $18,000 on the date of the accident. The boat was uninsured.

In addition, Paul and Donna had the following items of income and deduction:

·      Paul's salary $250,000

·      Paul's FIT withheld 6,770

·      Pauls' State income tax withheld 900

·      Donna's salary 56,000

·      Donna's FIT withheld 6,630

·      Donna's state income tax withheld 800

·      Home mortgage interest paid 7,890

·      Interest on personal auto loan (not deductible) 1,660

·      Interest on Visa Card (not deductible) 620

·      Doctor and hospital bills (including $380 for Hannah and $850 for the children) 9,700

·      Medical insurance reimbursement 1,000

·      Prescription drugs 640

·      Medical insurance premiums 3,810

·      Real estate taxes paid 3,850

·      Cash contributions to church 1,950

·      Appraised value of books donated to The public library 740

·      Paul's unreimbursed employee expenses to attend hotel management convention (airfare $340, hotel $170, meals $95, registration fee 340) 945

·      Refund of 2013 state income taxes (the Deckers itemized on their 2013 tax return) 1,520

Compute net tax payable or refund due for the Deckers for 2014 ignoring any credits for which they might be eligible.

1. What is the gain or loss on the sale of Acme Corp. stock?

2. What is Paul and Donna's AGI?

3. Before considering any phase-out, calculate itemized deductions for the following:

a. Medical expenses

b. Taxes

c. Home mortgage interest

d. Charitable contributions

e. Casualty losses

f. Miscellaneous itemized deductions

4. What is the phase-out of the itemized deductions?

5. What are the total P&D exemptions?

6. What is Paul and Donna's taxable income?

7. What is the total tax liability?

8. What is the net tax payable or refund due for 2014?