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ACCT 323 Quiz III (Comprehensive Problem)
COMPREHENSIVE TAX PROBLEM
During all of 2014, Daniel and Elizabeth Clay a married couple lived with their four children (all are
under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay
file jointly for 2014. Neither is blind, and both are under age 65. They reported the following taxrelated information for the year:
Dependents

SSN

Alex Clay

111-22-3333

James Clay

222-33-4444

Janet Clay

333-44-5555

Gladys Clay

444-55-6666

Mrs. Clay Salary Income

$125,000

Interest income from savings account

$5,000

Prize winnings from local radio station

$1,500

Municipal bond interest income

$2,000

Medical Expenses (no health insurance coverage)

$25,000

Real estate taxes

$4,200

Alimony paid by Mr. Clay to ex-wife

$12,000

State income tax

$1,800

Federal income tax withheld

$35,000

Qualified home mortgage interest

$11,000

Charitable contributions

$4,000

Mr. Daniel Clay owns 50% partnership interest in Clay & Madison LLC and provides you with the
following partnership income items from the partnership tax return:

Partnership Income & other items (100%):

Ordinary Income

$250,000

Long-term capital gain

$35,000

Long-term capital loss

($15,000)

Qualified dividends

$12,500

Charitable Contributions

$5,000

Cash distributions to partners $187,500

Other information:
1.

a. Daniel Clay is the beneficiary of a $56,250 insurance policy on the life of his father
Moses. The total premium paid by Moses up to date was $18,000. Moses dies and Daniel
elects to receive $16,875 per year for four years
2.
b. Mr. & Mrs. Clay make estimated federal tax payments totaled $15,000.
3.
c. Ignore any applicable child tax credit
Instructions
Complete Form 1040 and accompanying schedules for Mr. and Mrs. Clays 2014 return showing tax
due or refund.

Bonus Question:
Determine if the following is a tax and why or why not
1.
2.
3.
4.

a.
b.
c.
d.

$25 toll paid on the New Jersey Turnpike

$150 ticket for reckless driving
1% local surcharge on a hotel rooms to fund public roadways
2% city surcharge on wages earned in the city of New Orleans