The Deweys Are Expecting to Save on Their Taxes for 2017

question 180

Essay

The Deweys are expecting to save on their taxes for 2017. Not only have both incurred large medical expenses, but both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed.

Constructive Receipt

The tax principle that income is taxed when it is actually or constructively received, not necessarily when it is earned.

Control

The ability or authority to guide or manage operations, decisions, and policies of a business or project.

Income

Earnings received by an individual or entity, including wages, salaries, investments, and other forms of compensation, which are subject to tax.