During 2024, Richard and Greta Van Fleet, who are married and have 2 dependent children (ages 16 (in high school) and 22 (1st year in a Masters' program, but 5th year in college, full-time)), have the following information:
Total salaries (earned equally by Richard and Greta)
Bank account interest
State of Arkansas bond interest
Gift from Greta's dad
Life insurance proceeds (Richard's mom died)
Sale of Qualified Small Business Stock (adj. basis =$500,000)
Dividend income (BMW-based in Germany)
Long-term capital gains
Short-term capital losses
ABC limited partnership interest (passive)*
XYZ limited partnership interest (passive)*
* (these limited partnerships are not
real estate related)
They also incurred the following expenses:
Qualified medical expenses
State & local income taxes paid
Property taxes on home
Property taxes on vehicles (all ad valorem)
Qualified residence interest (original amount borrowed = $400,000)
Cash charitable contributions ($6,000 - church; $1,500 - St. Jude
Children's Hospital)
Tuition paid for qualified educational expenses for older child
who attends Big State University from Form 1098-T
(Ignore the phase-out for education credits)
They have the following federal tax payments:
Income tax withheld
Also, they want to make the maximum contribution possible to IRAs for both of them. Each of them has a traditional IRA and a Roth IRA to which they could contribute. Both of them are active participants in qualified plans at work. Richard is 66, and Greta is 56. They want you to advise them regarding making their IRA (i.e., which option makes more sense under the facts?).
Be prepared to answer questions regarding gross (total) income, AGI, taxable income, federal tax liability (before any credits), and additional tax due to the IRS or refund due back to the taxpayers. You should include any relevant credits that we covered to which the taxpayers are entitled based on the facts. Did the taxpayers make their contribution to a traditional IRA or a Roth IRA?
