Instructions: Use the relevant tax forms for your computations. You must download the relevant forms from the IRS website. Do not use tax software to prepare the returns. You need not complete the state tax returns. Make sure to include all the relevant supporting schedules for your federal return.
There are a total of five returns assignments. All five returns must be turned in no later than Monday, May 2 at 5:00 p.m. Please turn in the returns in one envelope to room JH 1111.
This is an individual assignment. You are not allowed to discuss or share the answers with any other student, friend, tax professional, colleague or a professor.
Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local chamber of commerce, while Wanda is employed part-time as a paralegal for a law firm.
a. During 2014, the deans had the following receipts:
Salaries ($60,000 for Lance, $41,000 for Wanda)
|City of Albuquerque general purpose bonds||$1,000|
|Ford Motor Company bonds||1,100|
|Ally Bank certificate of deposit||400 2,500|
|Child support payment from John Allen||7,200|
|Annual gift from parents||26,000|
|Settlement from Roadrunner Touring Company||90,000|
|Federal income tax refund (for tax year 2013)||400|
Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda was never issued a form 8332 wavier.) under the divorce decree, John was obligated to pay alimony and child support–the alimony payments were to terminate if Wanda remarried.
In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid for her medical expenses (including one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred
$90,000 to her in settlement of the personal injuries she sustained.
The Deans has the following expenditures for 2014:
Medical expenses (not coveredbyinsurance) $7,200 Taxes-
|Property taxes on personal residence||$3,600|
|State of new Mexico income tax (includes amount|
|withheld from wages during 2014)||4,200||7,800|
|Interest on home mortgage||6,000|
|Paid church pledge||3,600|
|Life insurance premiums (policy on Lance’s life)||1,200|
|Contributions to traditional IRA (on Wanda’s behalf)||5,000|
|Contributions to the reelection campaign fund of the|
|major of Santa Fe||500|
|Funeral expense for Wayne Boyle||6,300|
The life insurance policy was taken out but several years ago and designates Wanda as the beneficiary. As a part time employee, Wanda is excluded from coverage under her employer’s pension plan.
Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution.
The Deans’ household includes the following, for whom they provide more than half of the support:
|Social Security Number||Birth Date|
|Lance Dean (age 42)||123-45-6786||12/16/1972|
|Wanda Dean (age 40)||123-45-6787||08/08/1974|
|Penny Allen (age 19)||123-45-6788||10/09/1995|
|Kyle Allen (age 17)||123-45-6789||05/03/1997|
|Wayne Boyle (age75)||123-45-6785||06/15/1939|
Penny graduated from high school on May 9, 2014, and is undecided about college. During 2014, she earned $8,500 (placed in a savings account) playing a harp in the lobby if a local hotel. Wayne is Wanda’s widower father, who died on January 20, 2014. For the past few years, Wayne qualified as a dependent of the Deans.
Federal income tax withheld is $5200 (Lance) and $3000 (Wanda). The proper amount of social security and Medicare tax was withheld.
Determine the Federal income tax for 2014 for the Deans on a joint return by completing the appropriate forms. They do not want to contribute to the Presidential Election Campaign Fund. All members of the family had health care coverage for all of 2014. If an overpayment results, it is to be refunded to them.
Logan B Taylor is a widow whose wife, Sara died on June 6, 2012. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a local law firm. During 2014, he had the following receipts:
|City of Springfield general purpose bond||$3,000|
|Money market account at Omni Bank||300|
|Savings account at Boone State Bank||1,100||4,400|
|Inheritance from Daniel||60,000|
|Life insurances proceeds||200,000|
|Amount from sale of St. Louis lot||80,000|
|Proceeds from estate sale||9,000|
|Federal income tax refund (for 2013 tax overpayment)||700|
Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2014. Logan also was the designated beneficiary of an insurance policy on Daniel’s life with a maturity value of $200,000. The lot in St. Louis was purchased on May 2, 2009, for $85,000 and held as an investment. As the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2014, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the
$9,000 he received and has declined or stayed the same in value since Sara and Daniel died.
Logan’s expenditures for 2014 include the following:
Medicare expenses (including $10,500fordental) $11,500 Taxes—
State if Missouri income tax (includes withholdingsduring2014) $3,200
Property taxes onpersonalresidence 4,500 7,700
Interest onhomemortgage 4,600
Contributions to church (paid pledges for 2014and2015) 4,800
Logan and his dependents are covered by his employer’s health insurance policy for all of 2014. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helen’s implants. Helen is Logan’s widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 4, 2014, upon the advice of his pastor, he prepaid his pledge for 2015.
Logan’s household, all of whom he supports, includes the following:
|Social Security Number||Birth Date|
|Logan Taylor (age 48)||123-45-6787||08/30/1966|
|Helen Taylor (age 70)||123-45-6780||01/13/1944|
|Asher Taylor (age 23)||123-45-6783||07/18/1991|
|Mia Taylor (age 22)||123-45-6784||02/16/1992|
Helen receives a modest Social Security benefit. Asher, a son, is a full-time student in dental school and earns $4,500 as a part time dental assistant. Mia, a daughter, does not work and is engaged to be married.
Using the appropriate forms and schedules, compute Logan’s federal income tax for 2014. Federal income tax of $5,500 was withheld from his wages. If Logan has any overpayment on his income tax, he wants the refund sent to him. Assume that the proper amounts of Social Security and Medicare taxes were withheld. Logan does not want to contribute to the Presidential Election Campaign Fund.
Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1111, respectively. Alice’s birthday is September 21, 1967, and Bruce’s is June 27, 1966. They live at 473 Revenue Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (employer identification number 98-765432). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11-1111111)
The following information is shown on their Wage and Tax Statement (Forms W-2) for 2014.
|1||Wages, tips, other compensation||$58,000||$62,100|
|2||Federal income tax withheld||4,500||6,300|
|3||Social Security wages||58,000||62,100|
|4||Social Security tax withhold||3,596||3,850|
|5||Medicare wages and tips||58,000||62,100|
|6||Medicare tax withheld||841||900|
|16||State wages, tips, etc.||58,000||62,100|
|17||State income tax withheld||2,950||3,100|
The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1990 Social Security number 123-45-6788) and John (born February 7, 1994, Social Security number 123-45-6786). Both children are full-time student and live with the Byrds except while they are away at college.
Cynthia earned $4,200 from a summer internship in 2014, and john earned $3,800 from a part-time job.
During 2014, the Byrds provided 60% of the total support of Bruce’s widower father, Sam Byrd (Born March 6, 1938, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $800,000 on December 28.
The Byrds had the following expenses relating to their personal residence during 2014:
|Qualified interest on home mortgage||8,700|
|Repairs to roof||5,750|
|Fire and theft insurance||1,900|
The Byrds had the following medical expenses for 2014:
Doctor bill for Sam incurred in 2013 and not paiduntil2014 7,600
Prescription medicinesforSam 900
Hospital expensesforSam 3,500
Reimbursement from insurance company, receivedin2014 3,600
The medical expenses for Sam represents most of the 60% that Bruce contributed toward his father’s support.
Other relevant information follows:
o When they filled their 2013 state return in 2014, the Byrds paid additional state income tax of$900.
o During 2014, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be$50.
o The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very goodcondition.
o In 2014, the Byrds received interest income of $2,750, which was reported onform 1099-INT from Second NationalBank.
o Alice employer requires that all employees wear uniforms to work. During 2014, Alice spend $850 on new uniforms and $566 on laundrycharges.
o Bruce paid $400 for an annual subscription to the Journal of Franchise Managementand
$741 for annual membership dues to his professional association.
o Neither Alice nor Bruce’s employer reimburses for employeeexpenses.
o The Byrds do not keep the receipts for the sales taxes they paid and had nomajor purchases subject to salestax.
o Everyone in the Byrd family had health care coverage for all months of2014.
o Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wants to designate $3 to the Presidential Election CampaignFund.
Compute net federal tax payable or refund due for Alice and Bruce Byrd for 2014. If they have overpaid, they want the amount to be refunded to them. If you use tax forms for your computation, you will need forms 1040 and 2106 and Schedule A and B.
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11- 1111111). She also writes computer software programs for tax practitioners and has a part-time practice. Beth is single and has no dependents. Beth’s birthday is July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Beth’s Wage and Tax Statement (Form W-2) for 2014.
|1||Wages, tips, other compensation||$63,000.00|
|2||Federal income tax withheld||10,500.00|
|3||Social Security wages||63,000.00|
|4||Social Security withheld||4,030.00|
|5||Medicare wages and tips||63,000.00|
|6||Medicare tax withheld||942.50|
|16||State wages, tips, etc.||63,000.00|
|17||State income tax withheld||1,954.00|
During the year, Beth received interest of $1,300 from Arizona Federal Savings and Loan and
$400 from Arizona State Bank. Each financial institution reported the interest income on Form 1099-INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and
$650 from Orange Corporation. Each corporation reported Beth’s dividend payments on form 1099-DIV.
Beth received a $1,000 income tax refund from the state of Arizona on April 29, 2014. On her 2013 Federal income tax return, she reported total itemized deductions of $8,200, which included
$2,200 of state income tax withheld by her employer.
Fees earned from her part-time practice in 2014 totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, 2014, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, 2014, she sold the stock for $14 a share.
Beth bought a used sports utility vehicle for $6,000 on June 5, 2014. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, 2014, she sold the vehicle to a friend for $6,500.
On January 2, 2014, she acquired 100 shares of Blue Corporation common stock for $30 a share.
She sold the stock on December 19, 2014, for $55 a share.
During the year, Beth records revenue of $16,000 from the sale of a software program she developed. She incurred the following expenditures in connection with her software development business.
|Cost of personal computer||$7,000|
|Cost of printer||2,000|
Fee paid tocomputerconsultant 3,500
Beth elected to expense the maxim portion of the cost of the computer, printer, and furniture allowed under the provisions of §179. These items were placed in service on January 15, 2014, and used 100% in her business.
Although her employer suggested that Beth attend a convention on current developments in corporate taxation, she was not reimbursed for the travel expenses of $1,420 she incurred in attending the convention. The $1,420 included $200 for the cost of the meals. During the year, Beth paid $300 for prescription medicines and $2,875 for doctor bills and hospital bills. Medical insurance premiums were paid for her by her employer. Beth paid real property taxes of $1,766 on her home. Interests on her home mortgage were $3,845, and interest to credit card companies was $320. She contributed $30 each week to her church and $10 each week to United Way. Professional dues and subscriptions totaled
$350. Beth paid estimated Federal income taxes of $1,000
Compute the net federal tax payable or refund due for Beth R. Jordan for 2014. You will need forms 1040, 2106-EZ, and 4562 and Schedule A, B, C, D and SE.