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, and Wanda is employed part-time as a paralegal for a law firm. During 2018, the Deans had the following receipts: 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 has never issued a Form 8332 waiver.) 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. Because the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a 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 had the following expenditures for 2018: The life insurance policy was taken out by Lance 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: Penny graduated from high school on May 9, 2018, and is undecided about college. During 2018, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda’s widower father who died on December 20, 2017. For the past few years, Wayne qualified as a dependent of the Deans. Federal income tax withheld is $4,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. Determine the Federal income tax for 2018 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 2018. If an overpayment results, it is to be refunded to them. Suggested software: ProConnect Tax Online.

John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony of 6,000 per year to Katy and child support of 12,000. The 12,000 of child support covers 65% of Katys costs of rearing Kendra. Kendras Social Security number is 123-45-6789, and Katys is 123-45-6788. Johns mother, Sally, lived with him until her death in early September 2019. He incurred and paid medical expenses for her of 15,588 and other support payments of 11,000. Sallys only sources of income were 5,500 of interest income on certificates of deposit and 5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Johns household. Sallys Social Security number was 123-45-6787. John is employed by the Highway Department of the State of Louisiana in an executive position. His salary is 95,000. The appropriate amounts of Social Security tax and Medicare tax were withheld. In addition, 9,500 was withheld for Federal income taxes and 4,000 was withheld for state income taxes. In addition to his salary, Johns employer provides him with the following fringe benefits. Group term life insurance with a maturity value of 95,000; the cost of the premiums for the employer was 295. Group health insurance plan; Johns employer paid premiums of 5,800 for his coverage. The plan paid 2,600 for Johns medical expenses during the year. Upon the death of his aunt Josie in December 2018, John, her only recognized heir, inherited the following assets. Three months prior to her death, Josie gave John a mountain cabin. Her adjusted basis for the mountain cabin was 120,000, and the fair market value was 195,000. No gift taxes were paid. During the year, John reported the following transactions. On February 1, 2019, he sold for 45,000 Microsoft stock that he inherited from his father four years ago. His fathers adjusted basis was 49,000, and the fair market value at the date of the fathers death was 41,000. The car John inherited from Josie was destroyed in a wreck on October 1, 2019. He had loaned the car to Katy to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Katy nor Kendra was injured. John received insurance proceeds of 16,000, the fair market value of the car on October 1, 2019. On December 28, 2019, John sold the 300 acres of land to his brother, James, for its fair market value of 160,000. James planned on using the land for his dairy farm. Other sources of income for John are: Potential itemized deductions for John, in addition to items already mentioned, are: Part 1Tax Computation Compute Johns net tax payable or refund due for 2019. Part 2Tax Planning Assume that rather than selling the land to James, John is considering leasing it to him for 12,000 annually with the lease beginning on October 1, 2019. James would prepay the lease payments through December 31, 2019. Thereafter, he would make monthly lease payments at the beginning of each month. What effect would this have on Johns 2019 tax liability? What potential problem might John encounter? Write a letter to John in which you advise him of the tax consequences of leasing versus selling. Also prepare a memo addressing these issues for the tax files.

Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon does not want 3 to go to the Presidential Election Campaign Fund. Devons wife, Ariane, passed away in 2014. Devons son, Tom, who is age 18, resides with Devon. Toms Social Security number is 123-45-6788. Devon owns a sole proprietorship for which he uses the accrual method of accounting and maintains no inventory; the business operates as Devons Copy Shop, 422 E. Main Street, Albuquerque, NM 87131, IRS business activity code: 453990. His revenues and expenses for 2018 are as follows. Other income received by Devon includes the following. During the year, Devon and his sole proprietorship were involved in the following property transactions. Stock transactions were reported to Devon on Form 1099B; basis was not reported to the IRS. a. Sold Blue, Inc. stock for 45,000 on March 12, 2018. He had purchased the stock on September 5, 2015, for 50,000. b. Received an inheritance of 300,000 from his uncle, Henry. Devon used 200,000 to purchase Green, Inc. stock on May 15, 2018, and invested 100,000 in Gold, Inc. stock on May 30, 2018. c. Received Orange, Inc. stock worth 9,500 as a gift from his aunt, Jane, on June 17, 2018. Her adjusted basis for the stock was 5,000. No gift taxes were paid on the transfer. Jane had purchased the stock on April 1, 2012. Devon sold the stock on July 1, 2018, for 22,000. d. On July 15, 2018, Devon sold one-half of the Green, Inc. stock for 40,000. e. Devon was notified on August 1, 2018, that Yellow, Inc. stock he purchased from a colleague on September 1, 2017, for 52,500 had become worthless. Although he understood that investing in Yellow was risky, Devon did not anticipate that the corporation would declare bankruptcy. f. On August 15, 2018, Devon received a parcel of land in Phoenix worth 220,000 in exchange for a parcel of land he owned in Tucson. Because the Tucson parcel was worth 245,000, he also received 25,000 cash. Devons adjusted basis for the Tucson parcel was 210,000. He originally purchased it on September 18, 2015. g. On December 1, 2018, Devon sold the condominium in which he had been living for the past 20 years (1844 Lighthouse Lane, Albuquerque, NM 87131) and moved into a rented townhouse. The sales price was 480,000, selling expenses were 28,500, and repair expenses related to the sale were 9,400. Devon purchased the condominium for 180,000. Devons potential itemized deductions, exclusive of the aforementioned information, are as follows. During the year, Devon makes estimated Federal income tax payments of 35,000. Compute Devons lowest net tax payable or refund due for 2018 assuming that he makes any available elections that will reduce the tax. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 4, 5, A, B, C, D, and SE and Forms 4562, 8824, and 8949. Suggested software: ProConnect Tax Online.

Tim and Sarah Lawrence are married and filing a joint return. Tim's social security number is 123-45-6789, and Sarah's social security number is 111-11-1111. They reside at 100 Olive Lane, Covington, LA 70434. They have two dependent children, Sean and Debra, ages 12 and 16. Tim is a self-employed business person (sole proprietor of an unincorporated business) and Sarah a corporate executive. Tim has the following income and expenses from his business: Gross income $325,000Business Expenses $201.000 Records Related to Sarah's employment show the following:Salary $145,000Unreimbursed Travel (including $200 in meals) $1,600 Other pertinent information for the tax year include the following:Proceeds from the sale of stock acquired July 15, 2018 (cost $12,000) and sold August 1, 2018 for $9,800Proceeds from sale of stock acquired on September 18, 2017 (cost $5,000) and sold on October 5, 2018 for $3,800Wages paid to full-time domestic workers for housekeeping and child supervision…

Demarco and Janine Jackson have been married for 20 years and have four children (no children under age 6 at year-end) who qualify as their dependents (Damarcus, Jasmine, Michael, and Candice). The couple received salary income of $95,500 and qualified business income of $19,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $247,500 and they sold it for $297,500. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $18,400 of itemized deductions, and they had $4,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice was 18 years of age at year end, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) a. What is the Jacksons' taxable income, and what is their tax liability or…

Rick and Cindy Davis are married and file a joint return. They live at 3223 Taccone Ave., Apt. 37, Medford, MA 02155. Rick is an elementary school teacher in the Medford Public School system and Cindy is currently a homemaker after losing her job in late 2019. Cindy’s social security number is 412-34-5671 (date of birth 10/11/1981) and Rick’s is 412-34-5670 (date of birth 3/19/1979). Rick’s W-2 contained the following information: Wages (box 1) = $ 70,245.55 Federal W/H (box 2) = $ 5,924.43 Social security wages (box 3) = $ 70,245.55 Social security W/H (box 4) = $ 4,355.22 Medicare wages (box 5) = $ 70,245.55 Medicare W/H (box 6) = $ 1,018.56 Rick and Cindy have interest income of $237 from a savings account at Boston State Bank. Cindy also owns stock in Microsoft. Cindy received $265 in qualified dividends from Microsoft in 2020. Rick was divorced in 2014 and pays his ex-wife (Mary Tortelli) alimony. Their original divorce decree, which remains unchanged, dictates…

Rick and Cindy Davis are married and file a joint return. They live at 3223 Taccone Ave., Apt. 37, Medford, MA 02155. Rick is an elementary school teacher in the Medford Public School system and Cindy is currently a homemaker after losing her job in late 2019. Cindy’s social security number is 412-34-5671 (date of birth 10/11/1981) and Rick’s is 412-34-5670 (date of birth 3/19/1979). Rick’s W-2 contained the following information: Wages (box 1) = $ 70,245.55 Federal W/H (box 2) = $ 5,924.43 Social security wages (box 3) = $ 70,245.55 Social security W/H (box 4) = $ 4,355.22 Medicare wages (box 5) = $ 70,245.55 Medicare W/H (box 6) = $ 1,018.56 Rick and Cindy have interest income of $237 from a savings account at Boston State Bank. Cindy also owns stock in Microsoft. Cindy received $265 in qualified dividends from Microsoft in 2020. Rick was divorced in 2014 and pays his ex-wife (Mary Tortelli) alimony. Their original divorce decree, which remains unchanged, dictates that Rick pay Mary…

Demarco and Janine Jackson have been married for 20 years and have four children (no children under age 6 at year- end) who qualify as their dependents (Damarcus, Jasmine, Michael, and Candice). The couple received salary income of $96,500 and qualified business Income of $18,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $242,500 and they sold it for $292,500. The gain on the sale qualified for the exclusion from the sale of a principal residence, The Jacksons incurred $18,200 of itemized deductions, and they had $4,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice was 18 years of age at year end, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) a. What is the Jacksons' taxable income, and what is their tax liability or (refund)?…

Ingrid (43) and Daniel (48) are married but have lived apart since March 15, 2020. They have no divorce decree or separate maintenance agreement. They are both U.S. citizens and have valid social security numbers. Ingrid will not file a joint return with Daniel. Ethan (16), their son, went with Ingrid when she moved out and has lived with her since. Ingrid paid all the household expenses after they moved out. She did sign Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent so Daniel could claim Ethan. Together, Ingrid and Daniel provided more than 50% of Ethan's support. Ethan provided 5% of his own support. Daniel's wages were $27,000; Ingrid's were $29,850; Ethan's gross income was $1,525. Ingrid had no foreign income or investment income. 1.What is Ingrid's correct and most favorable 2020 filing status? Single. Married filing jointly. Married filing separately. Head of household. Qualifying widow(er). 2.Is Ingrid eligible to claim the Child Tax Credit…

Bill and Ana were married on June 10, 1997. They have lived in California all their married life. Ana filed for divorce on December 1, 2019. Bill moved out of the house they owned jointly on May 10, 2021, but they continued with marriage counseling for several months which eventually failed. Their divorce was finalized on November 10, 2021. Under community property rules when did their community rights over joint assets end? OA) June 10, 1997. C) November 10, 2021. B) May 10, 2021. D) December 1, 2019.

Demarco and Janine Jackson have been married for 20 years and have four children (no children under age 6 at year- end) who qualify as their dependents (Damarcus, Jasmine, Michael, and Candice). The couple received salary income of $98,500 and qualified business income of $16,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $232,500 and they sold it for $282,500. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $17,800 of itemized deductions, and they had $4,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice was 18 years of age at year end, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) Required: c. What would their taxable income be if their itemized deductions totaled…

Mark and Mary have been married for 12 years and have no children. The couple divorced several years ago. As part of the divorce agreement, Mary transferred stock (FMV = $50,000, AB = $15,000) to Mark. What is the amount of Mark’s gross income from receipt of the stock in 2021? Matt and Melanie have been married for 12 years and have no children. They are divorcing on January 1, 2021. Matt comes to you for tax advice. As part of their divorce, Melanie will pay Matt $2,000/month alimony until Matt finishes graduate school and can secure full-time employment (approx. 25 months). What amount, if any, does Matt included in gross income? Assume the divorce agreement is finalized January 1, 2021, and Matt receives 12 payments ($24,000 total) in 2021.

Camille Sikorski was divorced in 2018. She currently provides a home for her 15-year-old daughter Kaly. Kaly lived in Camille’s home for the entire year, and Camille paid for all the costs of maintaining the home. Camille received a salary of $65,000 and contributed $4,600 of it to a qualified retirement account (a for AGI deduction). She also received $8,000 of alimony from her former husband (per divorce decree issued in 2018). Finally, Camille paid $15,700 of expenditures that qualified as itemized deductions, including a $1,000 donation to United Way (a public charity). (Use the tax rate schedules and 2021 rules.) b. What would Camille’s taxable income be if she incurred $24,700 of itemized deductions, including a $1,000 donation to the United Way (a public charity), instead of $15,700? DescriptionAmount(1) Gross income(2) For AGI deductions(3) Adjusted gross income$0(4) Standard deduction(5) Itemized deductionsTaxable income

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