1040 Tax Return Project

William Brown, Jr. (age 66 as of December 31, 2017). William lost his wife, Barbara, in August 2016 as a result of a commuter airplane crash. At the time of her death, Barbara was age 50. William and Barbara were married for 25 years before her untimely death. Each year that they were married, William and Barbara filed a joint tax return. William is employed as an airline mechanic by Montana Airways. In 2017, his gross salary received was $89,000. (William's Social Security wages and Medicare wages were the same amount.) William has maintained qualified health insurance coverage through his employer for the entire year for himself and his dependents. William chooses not to contribute $3 to the presidential election campaign fund. His daytime phone number is 406-833-1436. If William is owed a refund, he wants it deposited directly into his checking account. The checking account number is 1472583960, and the banks routing number is 031000011.

William provides support for the following children who lived at home with him during 2017 (ages as of December 31, 2017): Amy (age 24), Allan (age 23), Matthew (age 22), Timothy (age 20), and twins Nathan and Andrew (age 16).

Amy Graduated from college 2 years ago. She continues to seek full-time employment. She earned $3,960 working part-time during 2017. Allan Is a full-time law school student who pays his own tuition. He earned $4,060 working part-time during 2017. Matthew Is a full-time graduate student who pays his own tuition. He earned $4,160 working during the summer of 2017. Timothy Does not attend school and earned $9,000 during 2017 performing stand-up comedy shows in night clubs. Nathan Attends high school full-time. During 2017, he earned $1,500 working for a lawn service during the summer. Andrew Attends high school full-time. During 2017, he earned $800 working as a camp counselor during the summer.

In addition to his own 6 children, William also supports a nephew, Zachary Young (age 19 as of December 31, 2017), who lived with him throughout 2017. Zachary does not attend school and earned $3,930 working part-time during 2017. William provides over half the support of all individuals living with him. Finally, William also supports Barbara's widowed mother, Dorothy Serenbetz (age 86 as of December 31, 2017), who lives in a nursing home. Dorothy receives Social Security benefits of $8,000, but has no other income. William has 2 adult children from a previous marriage: Jason and Amanda, ages 33 and 31 (at December 31, 2017) respectively. In previous years, William paid child support to his ex-wife until Jason and Amanda each reached the age of 18. During 2017, William paid $780 each month in alimony to his ex-wife who has never re-married since the dvorce. His ex-wifes social security number is 135-79-2486. William's cash receipts for 2017 include the following: Interest City of Buffalo bonds $ 6,900 General Motors Corp. bonds 7,800 Rochester National Bank certificate of deposit 8,700 $ 23,400 Dividends Gulf Corp. stock (qualified) $ 16,500 Exxon Corp. stock (qualified) 17,600 Chevron Corp. stock (unqualified) 18,700 52,800 Life insurance proceeds 60,000 Inheritance 125,000 Airline settlement Punitive damages $ 130,000 Physical personal injuries 120,000 250,000

The life insurance proceeds were paid to William because he was the beneficiary of a policy he held on Barbara's life. William had purchased the policy that paid $800,000 in the event of accidental death. In 2016, William elected to receive installment payments of $60,000 each year for a 20-year period. William received his first installment from the life insurance policy in 2016, and his second installment this year. The inheritance represents what was left of Barbaras estate after all debts and administration expenses were paid. Because William believed that Barbaras death was caused by the airlines negligence, he threatened to file a lawsuit against the airline. In a settlement with the airlines insurance carrier, William signed a release of all claims in return for the $250,000 payment. The personal injury portion of the payment was designated as being for the physical personal injuries suffered by Barbara Brown. William did not hire an attorney to represent him in this process.

On May 17, 2017 William received a $1,600 income tax refund from the state of Montana for the 2016 tax year. On his 2016 Federal income tax return, he reported total itemized deductions of $14,300, which included a $3,200 state income tax deduction. During 2017, William's company experienced a slow period. As a result, William was laid off by his company for 7 weeks. During that time, William collected $430 per week in unemployment compensation.

During 2017, William was voted airline mechanic of the year in the state of Montana by the Montana chapter of the federal airline mechanics union. As a result, he received a $3,500 prize. In addition, during 2017, William bought a $5 raffle ticket and won a laptop computer valued at $1,500. Throughout 2017, William was covered by a group term life insurance policy offered by his employer. The employer offers coverage to all employees equal to the employees annual salary. The employer pays the policys premium.

At the age of 25, William purchased a single life annuity from American Travelers Life Insurance Company. He paid $1,000 per month to the insurance company for exactly 35 years. Under the terms of the contract, at the age of 64, William began receiving $3,500 per month for the rest of his life. During 2017, William received $3,500 each month ($42,000 total) from American Travelers Life Insurance Company.

Williams cash payments for 2017 include the following payments that qualify as itemized deductions: Home mortgage loan interest $ 5,000 Property taxes 2,900 State and local income taxes paid 2,800 Charitable contributions 2,000 William made no other payments in 2017 that qualified as an itemized deduction.

William bought a used mini-van that he used for personal purposes for $4,350 on March 15, 2016. He purchased the vehicle from a friend who needed the cash. On September 12, 2017 he sold the vehicle to someone he did not know for $4,800. In addition, on October 11, 2017, William sold his Italian sports car for $28,000. He had originally purchased the car on October 16, 2012 for $41,000, and used it exclusively for personal purposes.

William sold the following securities during 2017, receiving a Form 1099-B from the broker for each transaction. In addition, the IRS received a copy of Form 1099-B for each transaction. However, the Form 1099-B did not include the cost basis for any securities sold.

Sales/Purchase # of Shares, Date Purchased, Date Sold, Purchase Price, Sale Price Corporation Shares Acquired Sold Per Share Per Share Breckenridge Corp. 20 4/22/16, 7/13/17, $31, $26 Keystone Corp. 30 5/23/16 , 7/14/17, $23, $36 Winter Park Corp. 40 6/24/17, 7/15/17, $27, $34 Arapaho Basin Corp. 50 7/25/16, 7/16/77, $60, $46 Vail Corp. 60 8/26/15, 7/17/17, $41, $66 Copper Mountain Corp. 70 9/27/15, 7/18/17, $61 $59 Telluride, Inc. 80 10/28/16, 7/19/17, $51 $58

Relevant social security numbers are as follows:

William Brown 123-98-2345 Barbara Brown 234-87-3456 Amy 345-76-4567 Allan 456-65-5678 Matthew 567-54-6879 Timothy 678-43-7890 Nathan 789-32-6789 Andrew 890-21-5678 Zachary Young 123-10-3456 Dorothy Serenbetz 234-09-4576

The total amount of Williams federal income taxes withheld by his employer in 2017 totaled $27,800. In addition, William applied his 2016 refund of federal income taxes of $1,400 toward his 2017 tax liability. Finally, after receiving the airline settlement, William made an estimated federal income tax payment of $36,000 in 2017.

Tax Computation Ignoring the alternative minimum tax (if applicable) and the net investment income tax (if applicable), prepare Williams federal income tax return for 2017. Consider including the following forms and schedules with your return: Form 1040 Form 8949 Schedule A (only necessary if taxpayer chooses to itemize deductions) Schedule B Schedule D