Assume you have been hired by a hypothetical client, Sarah Jackson, to prepare her Form 1040, U.S. Individual Income Tax Return, for the 2020 tax year. Assume all information provided relates to the 2020 tax year unless stated otherwise.

Sarah Jackson is a third-grade school teacher who earned a salary of $50,000 during the year. She is 45 years old and has been divorced for five years. She receives $1,300 of alimony payments each month from her former husband (divorced on March 26, 2015).

Sarah and her daughter Nancy (20 years old at the end of the year) moved to Michigan in January 2020. Sarah provides more than one-half of Nancys support. They had been living in Colorado for the past 15 years, but ever since her divorce, Sarah has been wanting to move back to Michigan to be closer to her family. Luckily, a teaching position opened up, and Sarah and Nancy decided to make the move. Sarah paid a moving company $2,500 to transport their personal belongings, and she and Nancy spent two days driving the 1,200 miles to Michigan.

Sarah rented a home in Michigan. Nancy decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $4,000 partial tuition scholarship this year, and Sarah helped out by paying the remaining $1,000 tuition cost. If possible, Sarah thought it would be best to claim an education credit for these expenses.

Sarah wasnt sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Sarah paid $6,800 in state income taxes and $8,500 in charitable contributions during the year. She also paid the following medical-related expenses for her and Nancy: Employee portion of insurance premiums $6,800 Out-of-pocket amounts paid to doctors $3,200 Prescription medicine $1,400 Nonprescription medicine $400 New contact lenses for Nancy $300

Shortly after the move, Nancy got distracted while driving and she ran into a street sign. The accident caused $1,900 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Sarah wasnt able to work for two months after the accident. Fortunately, she received $2,500 from her disability insurance. Her employer, the Central Michigan School District, pays 100 percent of the premiums on the policy as a nontaxable fringe benefit to its employees.

Sarah own and rents out a small apartment building. This year Sarah received $52,000 of rental payments from tenants, and she incurred $23,300 of expenses associated with the rental comprised of the following items: $5,900 depreciation, $7,100 property taxes, $2,700 insurance, legal services $2,300, $1,100 repairs, and $4,200 utilities.

A few years ago, Sarah acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $8,200 of interest income from U.S. Treasury bills and $2,500 interest income from City of Denver municipal bonds. Sarah borrowed $47,000 from a broker to make purchases of common stock investments although none of the stocks have paid any dividends yet. During the year, she paid the broker $2,100 of interest related to the loan.

Sarah had two stock sales during the 2020 tax year: 1) Sold 400 shares of ChemCo Corp. common stock for $13 per share. All of the shares were originally purchased for $86 per share on May 12, 2017; and 2) Sold 90 shares of Home Depot, Inc. common stock for $287 per share on October 14. The shares were inherited from Sarahs aunt on March 21, 1997. Sarah determined that her adjusted basis is $12.78 per share. We will discuss in class how to determine the basis of inherited shares including the impact of stock splits.

Sarah is a skilled chef who has developed a new way to prepare great tasting, low-carbohydrate meals using fresh ingredients. She provides instructional services by teaching cooking classes during the summer months when school is not in session and reports this activity as a sole proprietorship business on Schedule C using a principal business code of 611000 in Box B. Activity for the year included: gross receipts = $36,800, legal services = $399, office expense = $810, advertising = $3,150, supplies = $4,333, and the purchase of a portable convection oven on June 15 used 100% for business purposes = $1,475 (claim the largest depreciation deduction possible). In addition, Sarah occasionally uses her personal car for business. Assume that Sarah maintains a mileage log showing that she drove her car a total of 10,000 miles during the year including 1,200 miles for business purposes (use the 2020 standard mileage rate of $0.575 per mile). Sarah does not maintain a home office.

In addition to having $8,000 of federal income taxes withheld by her employer, Sarah made a total of $12,000 of estimated tax payments during the year ($3,000 on each of the due dates for quarterly estimated tax payments).

Taking the above information into account, prepare a complete and accurate U.S. federal income tax return (but not the state and local returns). The forms and schedules for the 2020 tax year are available in the Tax Forms folder in the Content area of our Elearning site and can also be downloaded and printed from the Internal Revenue Service (IRS) website (http://www.irs.gov):

Form 1040 pages 1 and 2 Schedule 1 Additional Income and Adjustments Schedule 2 Additional Taxes Schedule 3 Additional Credits and Payments Schedule A Itemized Deductions Schedule B Interest and Ordinary Dividends Schedule C Profit or Loss from Business

Schedule D Capital Gains and Losses Schedule E Supplemental Income and Loss Schedule SE Self-Employment Tax Form 4562 Depreciation and Amortization Form 8949 Sales & Dispositions of Capital Assets Form 8995 QBID Simplified Calculation