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52 . Paul Barrone is a graduate student at State University . His 10 - year-old son , Jamie , lives Ta with him ,

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52 . Paul Barrone is a graduate student at State University . His 10 - year-old son , Jamie , lives Ta with him , and Paul is Jamie's sole support . Paul's wife died in 2017 , and Paul has not* remarried . Paul received $320, 000 of life insurance proceeds ( related to his wife's death ) in early 2018 and immediately invested the entire amount as shown below : Date Item Selling Dividends/ Acquired Cost Date Sold Price Interest 1, 000 shares Blue 01 /23/ 18 $ 14, 000 400 shares Magenta 12 / 03 / 18 $ 3, 500 01 / 23 / 18) None 23, 000 600 shares Orange 01 / 23 / 18| 5750 100 shares Brown 230, 000 06 / 23 / 12 Green bonds 2 , 800 $2 , 300 01 / 23 / 18 01 / 23 / 18 14 , 000 None Gold money market 23, 000 $1 , 200 account 01 / 23 / 18 30, 000 5600 Paul had $ 42, 000 of taxable graduate assistant earnings from State University and received a $10,000 scholarship . He used $8, 000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie's day care . Jamie attended Little Kids Daycare Center , a state- certified child care facility . Paul received a statement related to the Green bonds saying that there was $ 45 of original issue discount amortizat tion during 2018 . Paul maintains the receipts for the sales taxes he paid of $735 . Paul lives at 1610 Cherry Lane , Bradenton , FL 34212 , and his Social Security number is 111 - 11 - 1111 . Jamie's Social Security number is 123 - 45- 6789\\ The university withheld $ 2, 000 of Federal income tax from Paul's salary . Paul is not itemizing his deductions . Part 1 - Tax Computation Compute Paul's lowest tax liability for 2018 . Part 2 - Tax Planning Paul is concerned because the Green bonds were worth only $18, 000 at the end of 2018 , $5, 000 less than he paid for them . He is an inexperienced investor and wants to know if this $5, 000 is deductible . The bonds had original issue discount of $2,000 when he purchased them , and he is curious about how that affects his investment in the bonds . The bonds had 20 years left to maturity when he pur- chased them . Draft a brief letter to Paul explaining how to handle these items. Also , prepare a memo for Paul's tax file

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