54.)

Logan B. Taylor is a widower 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 reported the following receipts. Tax Return Problem Decision Making Communications Salary $ 80,000 Interest income Money market account at Omni Bank $ 300 Savings account at Bosne State Bank 1,100 City of Springfield general purpose bonds 3,000 4,400 Inheritance from Daniel 60,000 Life insurance 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 Daniels 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. Logans other 2014 expenditures include the following. Medical expenses (including $10,500 for dental services) $11,500 Taxes State of Missouri income tax (includes withholdings) $3,200 Property taxes on personal residence 4,500 7,700 Interest on home mortgage 4,600 Contribution to church (paid pledges for 2014 and 2015) 4,800 Logan and his dependents were covered by his employers 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 Helens implants. Helen is Logans widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 5, 2014, upon the advice of his pastor, he prepaid his pledge for 2015. Logans 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, Logans mother, 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. Part 1Tax Computation Using the appropriate forms and schedules, compute Logans 2014 Federal income tax. 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. Suggested software: H&R BLOCK Tax Software. Part 2Follow-Up Advice In early 2015, the following events take place. Helen decides that she wants to live with one of her daughters and moves to Arizona. Asher graduates from dental school and joins an existing practice in St. Louis. Mia marries, and she and her husband move in with his parents. Using the insurance proceeds he received on Daniels death, Logan pays off the mortgage on his personal residence. Logan believes that these events may have an effect on his tax position for 2015. Therefore, he requests your advice. Write a letter to Logan explaining in general terms how the 2015 events will affect his Federal income tax liability. Assume that Logans salary and other factors not mentioned (e.g., property and state income taxes) will remain the same. Use the Tax Rate Schedules in projecting Logans tax for 2015.

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