Posted: November 17th, 2015

Comprehensive Individual Tax Return Problem

Facts:

Paige Turner is single and has two children from her previous marriage. Ali lives with Paige, and Paige provides more than half of her support.  In the current year, Ali earned $1,500 of interest income and $3,000 as a professional model. Leif lives with his father, Will (Lief lived with Will for all of the current year). Will provides more than half of Leif’s support. Paige pays “alimony” of $400 per month to Will. The payments are to continue until Leif reaches age 18, when they will be reduced to $150. Paige uses the cash method of accounting and a calendar year for reporting.  Paige’s birthday is May 31, 1975.  Ali’s birthday is October 5, 2004.  Leif’s birthday is December 1, 2002.Paige is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). Paige’s pay stubs indicate that she had $7,230 withheld in federal taxes, $4,987 in state taxes.  She earned $72,500 of wages subject to employee Social Security taxes and Medicare taxes. ASCI has an extensive fringe benefits program for its employees.

1. Paige earned salary of $70,000 (before subtracting her 401(k) and flexible spending plan contributions). She contributed $7,000 to her 401(k) account, and she contributed $3,600 to her flexible spending account.
2. ASCI paid $397 of whole life insurance premiums to cover Paige’s personal whole life insurance policy. ASCI also paid health club dues of $900 to a nearby health club on Paige’s behalf.
3. Taking advantage of ASCI’s educational assistance program, during the fall Paige enrolled in two graduate engineering classes at a local college. ASCI paid her tuition, fees, and other course-related costs of $2,300.
4. Paige received free parking in the company’s security garage that would normally cost $200 per month.
5. Paige manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year, Paige was awarded the Employee Safety Award on December 15. The cash award was $500.
6. On January 15, of the current year, Paige’s father died. From her father’s estate, she received stock valued at $30,000 (his basis was $12,000) and her father’s house valued at $90,000 (his basis in the house was $55,000).
7. Paige owns several other investments and received the following information reports for the current tax year:

In addition to the investments discussed above, Paige owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding. Grubstake reported taxable income of $200,000 and paid a distribution of $1.00 per share during the current year.  Paige does not materially participate in Grubstake’s activities.

1. Paige slipped on a wet spot in front of a computer store last July. She broke her ankle and was unable to work for two weeks. She incurred $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,000 for pain and suffering resulting from the injury. ASCI continued to pay her salary during the two weeks she missed because of the accident. ASCI’s plan also paid her $1,200 in disability pay for the time she was unable to work. Under this plan ASCI pays the premiums for the disability insurance as a fringe benefit.  The disability plan premiums are not included in Paige’s W-2 wages.
2. Paige received a Form 1099-B from her broker for the sale of the following securities during the current year (reported as “XX” below). The adjusted basis amounts were reported to the IRS.

Security	Sale Date	Purchase Date	Sales Price	Commission Paid on Sale	Her Basis
Nebraska state bonds	03/14/XX	10/22/07	$2,300	$160	$1,890
Cassill Corp (500 shares)	10/20/XX	02/19/12	$8,500	$425	$9,760

1. In addition to the taxes withheld from her salary, she also made timely estimated federal tax payments of $175 per quarter and timely estimated state income tax payments of $150 for the first three quarters. The $150 fourth-quarter state payment was made on December 28 of the current year. Paige would like to receive a refund for any overpayment.
2. In August of the current year, she received a federal refund of $180 and a state tax refund of $60 related to the tax returns she filed for the prior year. Her itemized deductions for the prior year were $18,430.
3. Paige found a renter for her father’s house on August 1. The monthly rent is $400, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months’ rent and a $400 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On August 1, Paige received $1,200 from the tenant per the terms of the lease agreement. In November, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December, he reduced his rental payment to $100 to compensate for the plumbing repairs. Paige provides you with the following additional information for the rental in the current year.

Property taxes                                      $770

Other maintenance expenses                  285

Insurance expense                                  495

Management fee                                     350

Depreciation (to be computed)                             ?

Local practice is to allocate 12 percent of the fair market value of the property to the land. (See ¶8 for basis information.) Paige makes all decisions with respect to the property.

1. Paige paid $2,050 in real estate taxes on her principal residence. The real estate tax is used to pay for town schools and other municipal services.
2. Paige drives a 2012 Acura TL. Her car registration fee (based on the car year) is $50 and covers the period 1/1/13 through 12/31/13. In addition, she paid $280 in property tax to the state based on the book value of the car.
3. In addition to the medical costs presented in ¶11, Paige incurred the following unreimbursed medical costs:

Dentist                            $ 310

Doctor                                 390

Prescription drugs                215

Over-the-counter drugs         140

Optometrist                         125

Emergency room charges      440

LASIK eye surgery          2,000

Chiropractor                        265

1. On March 1, Paige took advantage of low interest rates and refinanced her $75,000 home mortgage with her original lender. The new home loan is for 15 years. She paid $215 in closing costs and $1,500 in discount points (prepaid interest) to obtain the loan. The house is worth $155,000, and Paige’s basis in the house is $90,000. As part of the refinancing arrangement, she also obtained a $10,000 home-equity loan. She used the proceeds from the home-equity loan to reduce the balance due on her credit cards. Paige received several Form 1098 statements from her bank for interest paid by her in the current year. Details appear below. (See also ¶9)

Primary home mortgage              $7,100

Home-equity loan                   435

Credit cards                           498

Car loan                                390

1. On May 14 of the current year, Paige contributed clothing to the Salvation Army. The original cost of the clothing was $740. She has substantiation valuing the donation at $360. In addition, she made the following cash contributions and received a statement from each of the following organizations acknowledging her contribution:

Larkin College                              $850

United Way                                   125

First Methodist Church                   790

Amos House (homeless shelter)        200

Local Chamber of Commerce         100

1. On April 1of the current year, Paige’s house was robbed. She apparently interrupted the burglar because all that’s missing is an antique brooch she inherited from her grandmother (June 12, 2005) and $300 in cash. Unfortunately, she didn’t have a separate rider on her insurance policy covering the jewelry. Therefore, the insurance company reimbursed her only $500 for the brooch. Her basis in the brooch was $6,000, and its fair market value was $7,500. Her insurance policy also limits to $100 the amount of cash that can be claimed in a theft.
2. Paige sells real estate in the evening and on weekends (considered an active trade or business). She runs her business from a rental office she shares with several other realtors. Paige has been operating in a business-like way since 2003 and has always shown a profit. She had the following income and expenses from her business:

Commissions earned                $21,250

Expenses:

Advertising                                  2,200

Telephone                                        95

Real estate license                         130

Rent                                           6,000

Utilities                                           600

1. She has used her Acura TL in her business since July 1of the current year. During the year, she properly documented 6,000 business miles (1,000 miles each month). The total mileage on her car (i.e., business- and personal-use miles) during the year was 15,000 miles.  Paige elects to use the standard mileage method to calculate her car expenses. She spent $45 on tolls and $135 on parking related to the real estate business.
2. Paige’s company has an accountable expense reimbursement plan for employees from which Paige receives $12,000 for the following expenses:

Airfare                    $4,700

Hotel                        3,400

Meals                       2,000

Car rentals                   600

Entertainment                        900

Incidentals                   400

Total                       12,000

1. During the current year, Paige also paid $295 for business publications other than those paid for by her employer and $325 for a local CPA to prepare her tax return for the prior year.

QUESTION 1

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Net Form W-2 Wages?

2 points

QUESTION 2

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the miscellaneous income?

2 points

QUESTION 3

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Schedule B interest and dividend income?

2 points

QUESTION 4

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Schedule C trade or business net income?

2 points

QUESTION 5

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Schedule D capital gain or (loss)?

2 points

QUESTION 6

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Schedule E net rental income or (loss)?

2 points

QUESTION 7

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Adjusted Gross Income?

2 points

QUESTION 8

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the total itemized deduction for taxes?

2 points

QUESTION 9

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the total itemized deduction for interest expense?

2 points

QUESTION 10

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the total itemized deduction for charitable contributions?

2 points

QUESTION 11

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the total itemized deductions?

2 points

QUESTION 12

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the number of personal and dependent exemptions which can be claimed?

2 points

QUESTION 13

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the Taxable Income?

2 points

QUESTION 14

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the ordinary tax liability? (4 points)

4 points

QUESTION 15

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the tax liability for the long-term capital gains and qualified dividends?

2 points

QUESTION 16

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the tax liability for the self-employment tax? (4 points)

4 points

QUESTION 17

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the tax liability for the kiddie tax?

2 points

QUESTION 18

In the Comprehensive Individual Tax Return Problem for Paige Turner (Base case-2015), what is the balance due or (tax refund)?

I need questions 2-18