Question
64. Robert A. Kliesh, age 41, is single and has no dependents. Roberts Social Security num- ber is 111-11-1111. His address is 201 Front Street,
64. Robert A. Kliesh, age 41, is single and has no dependents. Roberts Social Security num-
ber is 111-11-1111. His address is 201 Front Street, Missoula, MT 59812. He is independ-
ently wealthy as a result of having inherited sizable holdings in real estate and corporate
stocks and bonds. Robert is a minister at First Presbyterian Church, but he accepts no
salary from the church. However, he does reside in the churchs parsonage free of
charge. The fair rental value of the parsonage is $3,000 a month. The church also pro-
vides him with a cash grocery allowance of $200 a week. Examination of Roberts
financial records provides the following information for 2012:
a. On January 16, 2012, Robert sold 1,000 shares of stock for a gain of $10,000. The
stock was acquired 14 months ago.
b. He received $30,000 of interest on private activity bonds that he had purchased in
2008. He also received $40,000 of interest on tax-exempt bonds that are not private
activity bonds.
c. He received gross rent income of $190,000 from an apartment complex he owns. He
qualifies as an active participant.
d. Expenses related to the apartment complex, which he acquired in 1987, were
$225,000.
e. Roberts interest income (on CDs) totaled $23,000. Because he invests only in growth
stocks, he has no dividend income.
f. He won $60,000 on the lottery.
g. On October 9, 2010, Robert exercised his rights under Falcon Corporations incen-
tive stock option plan. For an option price of $20,000, he acquired stock worth
$75,000. The stock became freely transferable in 2012. At the date the stock became
freely transferable, the fair market value was $95,000.
h. Robert was the beneficiary of an $800,000 life insurance policy on his Uncle Jake.
He received the proceeds in October.
i. Robert had the following potential itemized deductions from AGI:
$5,200 fair market value of stock contributed to Presbyterian Church (basis of
stock was $3,000). He had owned the stock for two years.
$4,200 interest on consumer purchases.
$3,900 state and local income tax.
$6,500 medical expenses (before 7.5% floor) for himself. He also paid $15,000 of
medical expenses for a parishioner who died.
$300 for a safe deposit box that is used to store investments and related legal
documents.
$5,000 paid for lottery tickets associated with playing the state lottery. Robert con-
tributed $5,000 of his winnings to the church.
$5,000 contribution to his traditional IRA.
Because Robert lived in Montana, he had no sales tax.
$750 contribution to the campaign of the Democratic candidate for governor.
j. Robert made estimated tax payments of $27,500.
Use Forms 1040 and 6251 and Schedules A, B, D, and E to compute the tax liability
(including AMT) for Robert A. Kliesh for 2012. Suggested software: H&R BLOCK
At Home.
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