Spencer Strasmore engages in the following transactions in 2

Spencer Strasmore engages in the following transactions in 2017:

Receives wages paid in cash of $50,000

In addition to his wages, his employer paid health insurance premiums on his behalf totaling $15,000

His employer also contributed $10,000 to a 401(k) on his behalf. He also elected to have $10,000 of his wages contributed to the 401(k) (these wages are not included in the $50,000 listed above).

Spencer received a statement from his 401(k) account stating there was a $2,000 capital gain in the current year that resulted from the sale of a mutual fund held in the 401(k) account. He did not receive any distributions from the account.

Spencer also has a side business that does consulting. In the current year he provided consulting services for a friend and since his friend was low on cash they agreed that the friend would pay him by painting his house. The FMV of the painting is $8,000.

Receives municipal bond interest from the city of West Lafayette bonds of $5,000

Spencer owns stock in Microsoft and the value of the stock increased from $4,000 to $6,000 during 2017. He did not sell any of the stock.

He received a gift from his grandma of $10,000.

Spencer owns a 20% interest in a LLC (taxed as a partnership). He received a Schedule K-1 from the partnership indicating that his share of the LLC income was $8,000 of ordinary income and $2,000 of long-term capital gain income.

He purchased 100 shares HP stock in 2012 for $2,000 and sold the stock for $1,000 on June 12, 2017. He also purchased 200 shares of HP on June 15, 2017 for $1,800.

In June 2017, he received a refund of $900 of state income taxes he paid last year. He had itemized deductions of $7,740 in 2016 (the standard deduction was $6,300) including state income taxes paid of $1,750.

He sold Disney stock for $10,000 on April 15, 2017 that he originally purchased on February 13, 2015 for $16,000.

Calculate Spencer’s gross income for 2017.

Solution

Wages paid in cash 50000 Capital Gain from mutual funds hel in 401 (k) acc 2000 FMV of painting 8000 Municipal bond interest 5000 Ordinary income from LLC 8000 LTCG from LLC 2000 Capital gain from sale of HP shares 1000 Capital Loss on sale of disney shares -6000 Gross total Income 70000