As a result of the COVID-19 Pandemic, Marcia Eagleton, age 49, has had a difficult year so far, but she has received income from several sources. She would like to know how each of these items will be taxable. The Partner in charge of your department suggested before we respond to Marcia that you write a well-prepared tax research memo to the files that might be utilized for other clients who will likely have similar questions. The memo should follow all of the principles of research we have learned in this course.

Marcia has received through July 31^st:

Salary until March 31^st, 2020 until she was laid off $19,000

Unemployment compensation – State of New Jersey 10 weeks @$2,100 per week

Unemployment compensation – Federal 10 weeks @ $ 600 per week Paid under the Federal Stimulus bill

Freelance income while unemployed 1 week @ $ 400

Gift from her Uncle Harry   $6,000

Federal stimulus payment $1,200

Loan from her company 401(k) plan $5,000

Rental income – she rented a bedroom to a friend 10 weeks @ 500

IRA Distribution (she will pay it back (“Rollover”) in 45 days $15,000

A. As suggested above, write a research memo to the files commenting on the tax effect in general of each of the above items.

B. Write a letter to Marcia, who is not a very sophisticated client, indicating how much she will be taxed on for the 7 months ended July 31, 2020, and explain how you came to this conclusion. She lives at 441 Beach Avenue in Roselle Park, New Jersey.