Question

Mason Phillips, age 45, and his wife, Ruth, live at 230 Wood Lane, Salt Lake City, UT 84101. Mason’s Social Security number is 111-11-1111. Ruth’s Social Security number is 123-45-6789. Mason and Ruth are cash basis taxpayers and had the following items for 2020:

Salary of $140,000.

Bad debt of $30,000 from uncollected rent.

Collection of unpaid rent from a prior year of $6,000.

Sale of § 1244 stock resulting in a loss of $105,000. The stock was acquired eight months ago.

Rental income of $60,000 (Property is managed by Mason & Ruth)

Rental expenses of $33,000.

Casualty loss on rental property of $10,000.

Personal casualty loss (from one event) of $3,000; not in a federally declared disaster area

Theft loss of $8,000 on a painting held for investment.

Other itemized deductions of $21,000.

Federal income tax withheld of $3,000.

Compute Mason and Ruth’s 2020 Federal income tax payable (or refund due)

Answer 1

Particulars	Amount	Amount
Salary		$140,000
Rental Income	$60,000
Less:- Rental Expenses	($33,000)	$27,000
Casualty loss on rental property		$ (10,000)
Bad debt on uncollected rent		$             -
Rent collected from prior year		$6,000
Ordinary loss on $1244 stock		($100,000)
Short term capital loss		($3,000)
AGI		$60,000
Less:- Itemized deduction
Personal casualty loss		$0
Loss on investment property (painting)		($8,000)
Other Itemized deductions		($21,000)
Deduction for qualified business income
($27000 * 20%)		($5,400)
Taxable Income		$25,600