ACC 175 Individual Taxation Case 2 Fall 2020 - Point Value: 30

General Information: type right on the form. (You can just search for the forms as soon as the page opens.) 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 2019 Tax Return for Roberta Santos:

Form 1040, pages 1 and 2

Schedule 1

Schedule D (2 pages)

Form 8949 (2 pages) 2018

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. Roberta does not want to contribute $3 to the Presidential Election Campaign Fund. Roberta is an advertising executive from ABC Advertising. During 2019, Roberta had the following items:

Income items:

a. $80,000 salary from ABC Advertising

b. Robertas mother died on January 7, 2019. 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 $2,500 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 $5,000

m. Total itemized deductions are $16,500 (all above amounts are included in this number)

n. $10,000 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. Also assume this is not small business stock.)

Sold 300 shares of Friendly Auto common stock on 10/5/2019 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 10/8/2019 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. For the stock sales start by putting them on Form 8949. Whether they have been held short term (one year or less), or long term, will determine the placement on Part I or Part II. Then carry these numbers forward to Schedule D. seems repetitious, but many folks have lots of items on Form 8949 and then they are summarized on Schedule D.

5. If an overpayment, she would like it refunded to her bank account (make up numbers), if an amount is owed, you do not need to calculate a penalty.

6. Watch the calculation of tax liability when a preparer is in a high tax bracket and has capital gains. Review the sample case. Round answers to the nearest dollar.