1 Jane Smith, age 40, is single, lives in Florida, and has no dependents She is employed as a legal secretary by Legal Services, Inc In addition, she owns and operates Word Processing Services as a sole proprietor She has sufficient evidence to prove both material participation and profit motivation for this activity Jane is a cash basis taxpayer Her employer provided her with health insurance coverage for all months in the 2021 tax year During 2021 Jane had the following income and expense items $100,000 salary from Legal Services, Inc $20,000 gross receipts from her Word Processing Services business $430 interest income from bank accounts at First Florida Bank $900 Christmas bonus from Legal Services, Inc $60,000 life insurance proceeds received as beneficiary upon the death of her father $6,500 check gifted to her by her wealthy auntie $200 won in a bingo game Expenses connected with the Word Processing Services business Office rent $6,800 Supplies 4,400 Utilities and phone 4,680 Contractor payments to typists 5,200 Website costs 500 Equipment rentals 3,000 $9,500 home mortgage interest paid to Bank of the South (on original acquisition debt of $400,000) Silverware with a fair market value of $15,000 was washed away from Janes home by a flood on April 10, 2021 during a federally declared disaster Jane paid $10,800 for the silverware on July 1, 2005 She was reimbursed $3,450 by her insurance company and received no other disaster relief funds Jane had loaned $2,100 to a friend, Bill, on January 8, 2016 Bill declared bankruptcy on October 12, 2021 and was unable to repay the loan Jane has evidence that the loan is a bona fide debt Legal Services, Inc withheld Federal income tax of $16,000 and the appropriate amount of FICA tax from her wages Alimony of $10,000 received from her former husband, Byron Smith The divorce was finalized in 2016 Interest income of $800 on City of Boca Raton bonds Jane made estimated federal tax payments of $1,000 Florida state sales tax of $946 from the IRS state sales tax table Property taxes on her residence of $1,100 Charitable contributions of $2,500 paid by check to qualified charities On November 8, 2021 Janes car was damaged in a federally declared disaster Right before the disaster struck, Janes 100 personal use automobile had a FMV of $45,000 After the disaster, the automobiles FMV was $38,000 Janes basis in the car was $52,000 Janes insurance policy would only pay for damages in excess of $6,000 For this reason, Jane decided not to file a claim for the damage Jane did not receive any other disaster relief funds Jane is not covered by a retirement plan at work and made a deductible traditional IRA contribution of $5,500 Use the following information to compute Jane Smiths 2021 federal income tax payable amount or tax refund amount 2 lice (age 46) and Bruce Byrd (age 48) are married, live in Oklahoma, and file a joint return Alice is the office manager for Smiles Dental Clinic and Bruce teaches 6th grade at Okly School The following info is from their 2021 W 2s Line Description Alice Bruce Wages, tips, other compensation 64,000 56,000 Federal income tax withheld 5,100 4,800 Social Security wages 64,000 56,000 Social security tax withheld 3,968 3,472 Medicare wages and tips 64,000 56,000 Medicare tax withheld 928 812 State Oklahoma Oklahoma State wages, tips, etc 64,000 56,000 State income tax withheld 3,250 2,800 The Byrds provided over half of the support for their two children, Joan (age 25) and Frank (age 22) Both children are full time students and live with the Byrds except when they are away at college Joan earned $6,700 from a summer internship in 2021, and Frank earned $3,800 from a part time job During 2021, the Byrds provided 60 of the total support of Bruces mother, Myna Byrd (age 78) Myna lived alone and covered the rest of her support with her only source of income, Social Security benefits None of Mynas Social Security benefits are taxable in 2021 Myna died in November of 2021 Bruce, the beneficiary of a policy on Mynas life, received life insurance proceeds of $200,000 on December 28th 2021 The Byrds incurred and paid the following expenses relating to their personal residence during 2021 Property taxes 3,500 Qualified interest on home mortgage 10,300 Utilities 4,200 The Byrds incurred and paid (unless otherwise noted) the following medical expenses during 2021 Medical insurance premiums 5,000 Doctor bill for Myna (incurred in 2020 and paid in 2021) 8,700 Operation for Myna 5,750 Prescription medicines for Myna 4,100 Hospital expenses for Myna 1,500 2021 medical expense insurance reimbursement received in 2021 3,200 The medical expenses for Myna represent most of the 60 that Bruce contributed toward his mothers support Other relevant info follows The Byrds paid additional state income tax of $1,300 when they filed their 2020 state return in 2021 In 2021, Alice and Bruce paid $400 for tickets and attended a dinner dance sponsored by the Humane Society (a qualified charity) The cost of comparable entertainment would be $100 The Byrds contributed $3,100 to the local Presbyterian Church and donated used clothing (cost of $1,100 and fair market value of $270 to Salvation Army All donations are supported by receipts and all clothing is in very good condition Bruce enjoys gambling in local casinos During 2021, Bruce had gambling winnings of $6,400 and gambling losses of $14,300 In 2021 the Byrds received interest income of $950 (reported on Form 1099 INT) from HSS Bank Alices employer requires all employees to wear uniforms to work During 2021, Alice spent $875 on new uniforms Bruce paid $320 for an annual subscription to the Best Teaching Practices Magazine, $815 for annual membership dues to the Oklahoma Teachers Association, and $560 on classroom supplies Neither Alices nor Bruces employer reimburses employee business expenses The Byrds did not keep the receipts for the state sales taxes they paid They had no major purchases subject to state sales tax Assume state sales tax is less than state income tax All members of the Byrd family had health insurance coverage all during 2021 Alice and Bruce paid no estimated federal income tax for 2021 Hint W2 amounts not used in the worksheet calculation are NOT the amounts to be listed in the Amounts Not Used Why area All three amounts listed in the Amounts Not Used Why area should be cash flows of Alice and or Bruce

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1/ Jane Smith, age 40, is single, lives in Florida, and has no dependents. She is employed as a legal secretary by Legal Services, Inc.

Jane Smith, age 40, is single, lives in Florida, and has no dependents. She is employed as a legal secretary by Legal Services, Inc. In addition, she owns and operates Word Processing Services as a sole proprietor. She has sufficient evidence to prove both material participation and profit motivation for this activity. Jane is a cash basis taxpayer. Her employer provided her with health insurance coverage for all months in the 2021 tax year.

During 2021 Jane had the following income and expense items:

$100,000 salary from Legal Services, Inc.
$20,000 gross receipts from her Word Processing Services business
$430 interest income from bank accounts at First Florida Bank
$900 Christmas bonus from Legal Services, Inc.

$60,000 life insurance proceeds received as beneficiary upon the death of her father
$6,500 check gifted to her by her wealthy auntie
$200 won in a bingo game
Expenses connected with the Word Processing Services business:

Office rent $6,800

Supplies 4,400
Utilities and phone 4,680
Contractor payments to typists 5,200
Website costs 500
Equipment rentals 3,000

$9,500 home mortgage interest paid to Bank of the South (on original acquisition debt of $400,000)
Silverware with a fair market value of $15,000 was washed away from Janes home by a flood on April 10, 2021 during a federally declared disaster. Jane paid $10,800 for the silverware on July 1, 2005. She was reimbursed $3,450 by her insurance company and received no other disaster relief funds.
Jane had loaned $2,100 to a friend, Bill, on January 8, 2016. Bill declared bankruptcy on October 12, 2021 and was unable to repay the loan. Jane has evidence that the loan is a bona fide debt.
Legal Services, Inc. withheld Federal income tax of $16,000 and the appropriate amount of FICA tax from her wages.
Alimony of $10,000 received from her former husband, Byron Smith. The divorce was finalized in 2016.

Interest income of $800 on City of Boca Raton bonds.
Jane made estimated federal tax payments of $1,000
Florida state sales tax of $946 from the IRS state sales tax table
Property taxes on her residence of $1,100
Charitable contributions of $2,500 paid by check to qualified charities

On November 8, 2021 Janes car was damaged in a federally declared disaster. Right before the disaster struck, Janes 100% personal use automobile had a FMV of $45,000. After the disaster, the automobiles FMV was $38,000. Janes basis in the car was $52,000. Janes insurance policy would only pay for damages in excess of $6,000. For this reason, Jane decided not to file a claim for the damage. Jane did not receive any other disaster relief funds.
Jane is not covered by a retirement plan at work and made a deductible traditional IRA contribution of $5,500.
Use the following information to compute Jane Smiths 2021 federal income tax payable amount or tax refund amount.

lice (age 46) and Bruce Byrd (age 48) are married, live in Oklahoma, and file a joint return. Alice is the office manager for Smiles Dental Clinic and Bruce teaches 6th grade at Okly School. The following info is from their 2021 W-2s.

Line Description Alice Bruce

Wages, tips, other compensation 64,000 56,000

Federal income tax withheld 5,100 4,800

Social Security wages 64,000 56,000

Social security tax withheld 3,968 3,472

Medicare wages and tips 64,000 56,000

Medicare tax withheld 928 812

State Oklahoma Oklahoma

State wages, tips, etc. 64,000 56,000

State income tax withheld 3,250 2,800

The Byrds provided over half of the support for their two children, Joan (age 25) and Frank (age 22). Both children are full-time students and live with the Byrds except when they are away at college. Joan earned $6,700 from a summer internship in 2021, and Frank earned $3,800 from a part-time job.

During 2021, the Byrds provided 60% of the total support of Bruces mother, Myna Byrd (age 78). Myna lived alone and covered the rest of her support with her only source of income, Social Security benefits. None of Mynas Social Security benefits are taxable in 2021. Myna died in November of 2021. Bruce, the beneficiary of a policy on Mynas life, received life insurance proceeds of $200,000 on December 28th 2021.

The Byrds incurred and paid the following expenses relating to their personal residence during 2021:

Property taxes 3,500
Qualified interest on home mortgage 10,300
Utilities 4,200

The Byrds incurred and paid (unless otherwise noted) the following medical expenses during 2021:

Medical insurance premiums 5,000

Doctor bill for Myna (incurred in 2020 and paid in 2021) 8,700
Operation for Myna 5,750
Prescription medicines for Myna 4,100
Hospital expenses for Myna 1,500
2021 medical expense insurance reimbursement received in 2021 3,200

The medical expenses for Myna represent most of the 60% that Bruce contributed toward his mothers support.

Other relevant info follows:

The Byrds paid additional state income tax of $1,300 when they filed their 2020 state return in 2021.
In 2021, Alice and Bruce paid $400 for tickets and attended a dinner dance sponsored by the Humane Society (a qualified charity). The cost of comparable entertainment would be $100.

The Byrds contributed $3,100 to the local Presbyterian Church and donated used clothing (cost of $1,100 and fair market value of $270 to Salvation Army. All donations are supported by receipts and all clothing is in very good condition.
Bruce enjoys gambling in local casinos. During 2021, Bruce had gambling winnings of $6,400 and gambling losses of $14,300.
In 2021 the Byrds received interest income of $950 (reported on Form 1099-INT) from HSS Bank.
Alices employer requires all employees to wear uniforms to work. During 2021, Alice spent $875 on new uniforms.
Bruce paid $320 for an annual subscription to the Best Teaching Practices Magazine, $815 for annual membership dues to the Oklahoma Teachers Association, and $560 on classroom supplies.

Neither Alices nor Bruces employer reimburses employee business expenses.
The Byrds did not keep the receipts for the state sales taxes they paid. They had no major purchases subject to state sales tax. Assume state sales tax is less than state income tax.
All members of the Byrd family had health insurance coverage all during 2021.
Alice and Bruce paid no estimated federal income tax for 2021.

Hint: W2 amounts not used in the worksheet calculation are NOT the amounts to be listed in the Amounts Not Used & Why area. All three amounts listed in the Amounts Not Used & Why area should be cash flows of Alice and/or Bruce.