ALAN AND ERICA WRIGHT INDIVIDUAL FEDERAL INCOME TAX RETURN Alan (age 52) and Erica (age 54) Wright are married and live in Akron, Ohio. Alan is the Chief Marketing Officer at a large electric company. Erica is a graphic design executive who currently consults with former clients. The Wrights have three children Angelica lage 18). Gordon (age 15), and Phil (age 12). In January, Angelica left home to attend a lberal arts college. The Wrights pay for Angelica's tuition and room in board while she takes classes full time she is not currently employed. The Wrights provided the following information: Alan's social security number is 598-94-2583 Erica's social security number is 301-52-2942 Angelica's social security number is 887-44-8710 Gordon's social security number is 810-42-9092 Phil's social security number is 855-11-3021 The Wright's mailing address is 2124 Daniels Ave, Akron, OH 44312 Alan Wright reported the following the following information relating to his employment during the Year: Employer Gross Wages Federal Income Tax State Income Tax Withholding Withholding General Electric $147,276 $36.250 $9,000 The above amounts do not reflect any income items described below. Alan's employer withheld all payroll taxes it was required to withhold. The entire Wright family was covered by minimum essential health insurance during each month in 2021. The insurance, valued at $15,000, was provided by Alan's employer, General Electric Erica Wright received the following self-employment income during the year (she uses the cash method of accounting) Consulting revenue reported to her on a Form 1099-MISC. Box 7 High-end Retail $35,000 Mustard Seed Health Products $7,600 Strategic Solutions $2,650 In this self-employment endeavor. Erica is an active participant and the activities qualify as trade or businesses for the Qualified Business income Deduction. Unfortunately, Erica did not keep records of any of her business expenses for the year. The Wrights also received the following during the year. Interest income from First Bank of Ohio $315 Interest income from Akron, Ohio School District $210 Interest income from U.S. Treasury Bond $345 Interest income from General Mills corporate bond $385 Interest income from the State of Connecticut's Tourism Support Private Activity Bond Qualified dividend income from AT&T Qualified dividend income from Verizon Qualified dividend income from JPMorgan Chase Qualified dividend income from Target Corp. Qualified dividend income from Wells Fargo Qualified dividend income from Procter & Gamble Qualified dividend income from PepsiCo Qualified dividend income from Kellogg Qualified dividend income from Abbott Labs Qualified dividend income from Walmart Life insurance payment - Mutual life (mother's passing) Cash gift from her father Ohio state income tax refund $60,000 $1,450 $745 $210 $435 $143 $200 $230 $210 $285 $345 $145,000 $4,000 $350 Refund was from state tax they paid in 2020. They deducted all of their state taxes as itemized deductions in 2020. Total itemized deductions were $32,000, $3,000 of which were state taxes. Erica received the following payments as a result of a lawsuit she filed for damages sustained in a car accident: Medical Expenses for physical injuries $16,400 Emotional Distress (from having been physically injured) $7,200 Punitive Damages $32,000 Total $55,600 Eight years ago, Alan purchased an annuity contract for $93,000. He received his first annuity payment on January 1, 2021. The annuity will pay Alan $17,000 per year for ten years (beginning with this year) The $17,000 payment was reported to Alan on Form 1099-R for the current year. On January 3, 2021, the Wrights sold their prior principal residence. They purchased that residence in 2011 and had lived there full-time until they sold it this year. They originally purchased the home for $305,000. The Wright family has never claimed any tax depreciation (nor were they allowed to) on the home. The sales price of the home was $840,000. The home is located at 502 Greystone Drive, Wadsworth, OH 44281. The Wrights took two trips to Cleveland. While on the first trip they lost $2800 gambling, but on the second trip they won $2500 The Wrights did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year. The Wrights made the following payments during 2021 Dentist (unreimbursed by insurance) $1,400 Doctors (unreimbursed by Insurance) $450 Prescriptions (unreimbursed by insurance) $300 Real property taxes on residence $4,500 Vehicle registration fee (based on age of the vehicle) $150 Mortgage interest on principle residence $7.950 Contribution to the American Cancer Society $2.200 Contribution to the Habitat for Humanity $1,500 Contribution to Methodist Church of OH $2.750 Contribution to Senator Bob Left's Re-election Campaign $2.500 During the year, Alan paid $17,400 in alimony and child support payments to a former spouse, Natalie (SSN #568-72-8787), whom he divorced in 2014. When his daughter Wendy ISSN 568-72-666), who lives with her mother full-time, reaches the age of 18 the payments will drop to $5.400 The Wrights had the following activity in their brokerage account during the year fail transactions were reported on a Form 1099-8 and basis information for each stock sale was reported to the IRS): Sold 2,000 shares of Verizon 7/1/21 $22.000 Sold 75 shares of Apple, Inc. 4/15/21 $27.625 Sold 300 shares of JPMorgan Chase 10/14/21 $14.300 Purchased 100 shares of Procter & Gamble 7/10/21 $7,700 Purchased 350 shares of JPMorgan Chase 11/1/21 $14.000 Purchased 350 shares of PepsiCo 5/14/21 $32.000 Purchased 300 shares of Kellogs 10/14/21 $21.000 Relevant tax basis/holding period information related to sales of securities in the current year. Purchased 2,000 shares of Verizon on 5/1/20 for $20,000 Purchased 200 shares of Apple, Inc. on 3/8/18 for $89.000 Purchased 300 shares of JPMorgan Chase on 1/12/17 for $8,000 In order for Alan and Erica to maintain their full-time jobs, they send Phil to a child care program after school five days a week. During the year, they paid the day care operator 512.200 for Phil's care The Wrights personal residence was burglarized on October 1. The Wrights had the following personat use property stolen: Item Purchase Date Fair Value on Tax Basis of item Insurance Date of Theft Reimbursement Received 09/01/2021 4,000 Desktop 03/01/2018 3.000 3.500 Computer TV/Projector 03/01/2018 6.000 12.000 Gold Jewelry 07/01/2019 Total 2,400 Bike 4 000 600 400 1,200 600 11.000 7.000 13,000 24000 Dashboard Calendar To Do Notifications Inbox Part 1: Tax return preparation (35 points) You have been engaged to prepare the 2021 federal income tax return for Alan and Erica Wright Your tax form submission should include, as applicable: Form 1040, Schedules 1, 4, A, B, C, D, E, SE and Forms 4684 and 8949. You will come across many items on the tax return we have not talked about in class; if we have not covered it in class, and it is not included in the information below, you do not need to address it on this assignment. Your solution should contain a detailed Excel workpaper that calculates the tax due or refunded with the return and calculated in the form of the tax formula (see Ch. 4 lecture slides). The calculation should be well labeled and EASY to follow. This presentation will be factored into your grade. Do NOT include any references or citations on your workpaper. You must complete a typed return using 2021 forms found on Canvas. Use the following assumptions in preparing the return: o Use all opportunities under law to minimize the 2021 federal income tax. If required information is missing, use reasonable assumptions to fill in the gaps. o Use whole dollars when preparing the tax return. o Do not prepare a state income tax return. Ignore alternative minimum tax. Part 2: Client memo (5 points) Complete a letter to the client regarding tax planning advice. Identify and explain two reasonable tax planning items the family could use to minimize their tax liability and/or maximize their wealth. All items would be implemented in future years and do not impact the current tax return. This memo should not exceed one single-spaced page. 1 ALAN AND ERICA WRIGHT INDIVIDUAL FEDERAL INCOME TAX RETURN Alan (age 52) and Erica (age 54) Wright are married and live in Akron, Ohio. Alan is the Chief Marketing Officer at a large electric company. Erica is a graphic design executive who currently consults with former clients. The Wrights have three children Angelica lage 18). Gordon (age 15), and Phil (age 12). In January, Angelica left home to attend a lberal arts college. The Wrights pay for Angelica's tuition and room in board while she takes classes full time she is not currently employed. The Wrights provided the following information: Alan's social security number is 598-94-2583 Erica's social security number is 301-52-2942 Angelica's social security number is 887-44-8710 Gordon's social security number is 810-42-9092 Phil's social security number is 855-11-3021 The Wright's mailing address is 2124 Daniels Ave, Akron, OH 44312 Alan Wright reported the following the following information relating to his employment during the Year: Employer Gross Wages Federal Income Tax State Income Tax Withholding Withholding General Electric $147,276 $36.250 $9,000 The above amounts do not reflect any income items described below. Alan's employer withheld all payroll taxes it was required to withhold. The entire Wright family was covered by minimum essential health insurance during each month in 2021. The insurance, valued at $15,000, was provided by Alan's employer, General Electric Erica Wright received the following self-employment income during the year (she uses the cash method of accounting) Consulting revenue reported to her on a Form 1099-MISC. Box 7 High-end Retail $35,000 Mustard Seed Health Products $7,600 Strategic Solutions $2,650 In this self-employment endeavor. Erica is an active participant and the activities qualify as trade or businesses for the Qualified Business income Deduction. Unfortunately, Erica did not keep records of any of her business expenses for the year. The Wrights also received the following during the year. Interest income from First Bank of Ohio $315 Interest income from Akron, Ohio School District $210 Interest income from U.S. Treasury Bond $345 Interest income from General Mills corporate bond $385 Interest income from the State of Connecticut's Tourism Support Private Activity Bond Qualified dividend income from AT&T Qualified dividend income from Verizon Qualified dividend income from JPMorgan Chase Qualified dividend income from Target Corp. Qualified dividend income from Wells Fargo Qualified dividend income from Procter & Gamble Qualified dividend income from PepsiCo Qualified dividend income from Kellogg Qualified dividend income from Abbott Labs Qualified dividend income from Walmart Life insurance payment - Mutual life (mother's passing) Cash gift from her father Ohio state income tax refund $60,000 $1,450 $745 $210 $435 $143 $200 $230 $210 $285 $345 $145,000 $4,000 $350 Refund was from state tax they paid in 2020. They deducted all of their state taxes as itemized deductions in 2020. Total itemized deductions were $32,000, $3,000 of which were state taxes. Erica received the following payments as a result of a lawsuit she filed for damages sustained in a car accident: Medical Expenses for physical injuries $16,400 Emotional Distress (from having been physically injured) $7,200 Punitive Damages $32,000 Total $55,600 Eight years ago, Alan purchased an annuity contract for $93,000. He received his first annuity payment on January 1, 2021. The annuity will pay Alan $17,000 per year for ten years (beginning with this year) The $17,000 payment was reported to Alan on Form 1099-R for the current year. On January 3, 2021, the Wrights sold their prior principal residence. They purchased that residence in 2011 and had lived there full-time until they sold it this year. They originally purchased the home for $305,000. The Wright family has never claimed any tax depreciation (nor were they allowed to) on the home. The sales price of the home was $840,000. The home is located at 502 Greystone Drive, Wadsworth, OH 44281. The Wrights took two trips to Cleveland. While on the first trip they lost $2800 gambling, but on the second trip they won $2500 The Wrights did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year. The Wrights made the following payments during 2021 Dentist (unreimbursed by insurance) $1,400 Doctors (unreimbursed by Insurance) $450 Prescriptions (unreimbursed by insurance) $300 Real property taxes on residence $4,500 Vehicle registration fee (based on age of the vehicle) $150 Mortgage interest on principle residence $7.950 Contribution to the American Cancer Society $2.200 Contribution to the Habitat for Humanity $1,500 Contribution to Methodist Church of OH $2.750 Contribution to Senator Bob Left's Re-election Campaign $2.500 During the year, Alan paid $17,400 in alimony and child support payments to a former spouse, Natalie (SSN #568-72-8787), whom he divorced in 2014. When his daughter Wendy ISSN 568-72-666), who lives with her mother full-time, reaches the age of 18 the payments will drop to $5.400 The Wrights had the following activity in their brokerage account during the year fail transactions were reported on a Form 1099-8 and basis information for each stock sale was reported to the IRS): Sold 2,000 shares of Verizon 7/1/21 $22.000 Sold 75 shares of Apple, Inc. 4/15/21 $27.625 Sold 300 shares of JPMorgan Chase 10/14/21 $14.300 Purchased 100 shares of Procter & Gamble 7/10/21 $7,700 Purchased 350 shares of JPMorgan Chase 11/1/21 $14.000 Purchased 350 shares of PepsiCo 5/14/21 $32.000 Purchased 300 shares of Kellogs 10/14/21 $21.000 Relevant tax basis/holding period information related to sales of securities in the current year. Purchased 2,000 shares of Verizon on 5/1/20 for $20,000 Purchased 200 shares of Apple, Inc. on 3/8/18 for $89.000 Purchased 300 shares of JPMorgan Chase on 1/12/17 for $8,000 In order for Alan and Erica to maintain their full-time jobs, they send Phil to a child care program after school five days a week. During the year, they paid the day care operator 512.200 for Phil's care The Wrights personal residence was burglarized on October 1. The Wrights had the following personat use property stolen: Item Purchase Date Fair Value on Tax Basis of item Insurance Date of Theft Reimbursement Received 09/01/2021 4,000 Desktop 03/01/2018 3.000 3.500 Computer TV/Projector 03/01/2018 6.000 12.000 Gold Jewelry 07/01/2019 Total 2,400 Bike 4 000 600 400 1,200 600 11.000 7.000 13,000 24000 Dashboard Calendar To Do Notifications Inbox Part 1: Tax return preparation (35 points) You have been engaged to prepare the 2021 federal income tax return for Alan and Erica Wright Your tax form submission should include, as applicable: Form 1040, Schedules 1, 4, A, B, C, D, E, SE and Forms 4684 and 8949. You will come across many items on the tax return we have not talked about in class; if we have not covered it in class, and it is not included in the information below, you do not need to address it on this assignment. Your solution should contain a detailed Excel workpaper that calculates the tax due or refunded with the return and calculated in the form of the tax formula (see Ch. 4 lecture slides). The calculation should be well labeled and EASY to follow. This presentation will be factored into your grade. Do NOT include any references or citations on your workpaper. You must complete a typed return using 2021 forms found on Canvas. Use the following assumptions in preparing the return: o Use all opportunities under law to minimize the 2021 federal income tax. If required information is missing, use reasonable assumptions to fill in the gaps. o Use whole dollars when preparing the tax return. o Do not prepare a state income tax return. Ignore alternative minimum tax. Part 2: Client memo (5 points) Complete a letter to the client regarding tax planning advice. Identify and explain two reasonable tax planning items the family could use to minimize their tax liability and/or maximize their wealth. All items would be implemented in future years and do not impact the current tax return. This memo should not exceed one single-spaced page. 1