At the beginning of 2015, Donna Harp was employed as a cinematographer by Farah Movie, Inc., a motion picture company in Los Angeles, California. In June, she accepted a new job with Ocala Production in Orlando, Florida. Donna is single and her Social Security number is 000-00-1111. She sold her house in California on August 10 for $500,000. She paid a $14,000 sales commission. The house was acquired on March 23, 1988, for $140,000. The cost of transporting her household goods and personal effects from California to Orlando amounted to $2,350. To travel from California to Florida, she paid travel and lodging costs of $370 and $100 for meals. On July 15, she purchased a house for $270,000 on 1225 Minnie Lane in Orlando. To purchase the house, she incurred a 20-year mortgage for $170,000. To obtain the loan, she paid points of $3,400. The $3,600 of property taxes for the house in Orlando were prorated with $1,950 being apportioned to the seller and $1,650 being apportioned to the buyer. In December of the current year she paid $3,600 for property taxes. Other information related to her return:

Salary from Farah Movie, Inc. $30,000

Salary from Ocala Production, Inc. 70,000

Federal income taxes withheld by Farah 6,000

Federal income taxes withheld by Ocala 22,000

FICA taxes withheld by Farah 2,295

FICA taxes withheld by Ocala 5,355

Interest income from Sun National Bank 1,800

Dividend income (qualifying dividends) 10,000

Interest paid for mortgage:

Home in California 6,780

Home in Orlando 3,800

Property taxes paid in California 4,100

Sales taxes paid in California and Florida 3,125

State income taxes paid in California 2,900

Here is some additional information that will help you with this problem: Donna was born on May 15, 1962. The zip code for her Florida address is 33442. Donna's federal income tax for the previous tax year was only $5000 The $10,000 Dividend Income is to be treated as QUALIFYING Dividend Income. Here is some clarifying information for you: Social Security (OASDI) Taxes were withheld by Farah in accordance with 2016 requirements (if you use software, it will calculate this for you) Medicare Taxes were withheld by Farah in accordance with 2016 requirements (if you use software, it will calculate this for you) Social Security (OASDI) Taxes withheld by Ocala in accordance with 2016 requirements (if you use software, it will calculate this for you) Medicare Taxes withheld by Ocala in accordance with 2016 requirements (if you use software, it will calculate this for you)

Property Taxes Summary and Clarification:

Donna Harp paid $4100 of property taxes to the California taxing authorities.

Donna also wrote a check to the Florida taxing authorities for $3600 to cover the property taxes on the Florida property. It is crucial for you to understand that although Donna paid this $3600 property tax bill, she only bought the Florida house on July 15 and the seller of the house that lived in it from January - July 15 paid Donna $1950 to cover the real estate taxes for that period. That is what the book means when it says "The $3600 of property taxes for the house on Orlando Florida were prorated with 1950 being apportioned to the seller and 1650 to the buyer." Given this information, make sure to carefully and correctly deduct Donna's property taxes on Schedule A. No additional guidance on this issue can or will be offered.

A. Determine the amount of recognized gain on the sale of the residence.

B. Prepare Forms 3903, 8960, and 1040, including Schedules A, B, and D.