ACC 175 Individual Taxation

Case 2 - 2024 edition - Point Value: 40

General Information:

The forms that are required are attached to the assignment. If you choose to print and write on the forms, just be sure that I can read your numbers. You will submit the return to the Blackboard link. Each student must individually complete and submit for grading all pages of the tax return. Group efforts are not permitted and will result in a -0- for all parties involved. Prepare the 2022 Tax Return for Roberta Santos:

Form 1040, pages 1 and 2

Schedule 1

Schedule B

Schedule D, pages 1 and 2

Even though Form 8812 would be required, you do not need to attach it as we have already completed this form. However, do put the credit amount on page 2, line 19.

2022 Tax Return Information:

Roberta Santos, age 41, is single and lives at 120 Seaborne Ave, Springfield, IL 60781. Her Social Security number is 540-45-6789. Roberta has been divorced from her husband, Wayne since 6/1/2016. She has full custody of their son, Jason Santos, who is 12 years old. Jasons social security number is 189-11-1112. He is eligible for the child tax credit. Roberta does not want to contribute $3 to the Presidential Election Campaign Fund, and she has not bought or sold any digital assets. Roberta is an Advertising Executive for ABC Advertising. During 2022, Roberta had the following items:

Income items:

a. $80,000 salary from ABC Advertising

b. Robertas mother died on January 7, 2022. Roberta inherited assets worth $625,000 from her mother.

As the sole beneficiary of her mothers life insurance policy, Roberta received Insurance proceeds of

$300,000. Her mothers cost basis for the life insurance was $120,000

c. Gift of $3,000 from her favorite aunt for her birthday

d. Interest income of $2,000 from First Savings Bank

e. Qualified and Ordinary Dividend income of $1,800 from Amber Corporation

f. Interest income of $3,750 on City of Springfield school bonds

g. Alimony of $16,000 from Wayne

h. Stock sale proceeds, $4,800 (see below for detail)

Expense items:

i. Contribution of $250 to the campaign of a candidate for governor

j. A $1,000 ticket for parking in a handicapped space

k. Attorneys fees of $500 associated with unsuccessfully contesting the parking ticket

l. State and local taxes withheld are $5,500

m. Mortgage interest expense is $10,000

n. Real estate taxes are $2,000

o. $9,000 withholding for Federal income taxes on her W2

In addition to the information above, Roberta purchased stock in various corporations over the past few years and below are her records regarding stock sales. (Assume she received 1099-Bs with basis reported to the IRS marked as Box D, and did not dispose of any investments in a qualified opportunity fund. Also assume this is not small business stock.)

Sold 300 shares of Friendly Auto common stock on 10/5/2022 for $4,000. Purchased 1,000 shares of Friendly Auto common stock on 2/15/2012 for $10,000. Note: you will need to allocate the 300 shares cost based on the original purchase of 1,000 shares.

Sold 40 shares of Pro Core common stock on 10/8/2022 for $800. Purchased 40 shares of Pro Core common stock on 5/25/2016 for $450.

HINTS:

1. Determine the optimum filing status for Roberta.

2. Determine if any income items can be excluded from her return.

3. Determine if any expense items are not deductible.

4. Determine if she should itemize or use the standard deduction.

5. For the stock sales you will aggregate the sales and put them directly on Schedule D. Form 8949 is not required in this case.

6. If an overpayment, she would like it applied to her 2023 estimated tax; if an amount is owed, you do not need to calculate a penalty.

7. Review the calculation of tax liability when a preparer is in a high tax bracket and has capital gains.

Review the sample case for the tax calculation. Round all answers to the nearest dollar.

8. You do not need to attach the Form 8812 but put the amount on line 19.