Comprehensive Problem 4-1
Skylar and Walter Black have been married for 25 years. They live at 883 Scrub Brush Street, Apt. 52B, Las Vegas, NV 89125. Skylar is a stay-at-home parent and Walt is a high school teacher. His W-2 form is located on the next tab. Skylar's Social Security number is 222-43-7690 and Walt's is 700-01-0002. Neither are age 65 or older. The Blacks provide all the support for Skylar's mother, Rebecca Backin (Social Security number 411-66-2121), who lives in a nursing home in Reno, NV and has no income. Walter's father, Alton Black (Social Security number 343-22-8899), lives with the Blacks in Las Vegas. Although Alton received Social Security benefits of $7,600 in 2020, the Blacks provide over half of Alton's support. Skylar and Walt claim a $500 other dependent credit each for Rebecca and Alton.
Walts earnings from teaching are included on the W-2 (see separate tab).
The Blacks moved from Maine to Nevada. As a result, they sold their house in Maine on January 4, 2020. They originally paid $75,000 for the home on July 3, 1995, but managed to sell it for $604,000. They spent $14,000 on improvements over the years. They are currently renting in Las Vegas while they look for a new home.
The Blacks received a 1099-DIV from their mutual fund investments (see separate tab).
The Blacks own a ski condo located at 123 Buncombe Lane, Brian Head, UT 84719. The condo was rented for 185 days during 2020 and used by the Blacks for 15 days. The rental activity does not rise to the level to qualify for the QBI deduction. Pertinent information about the condo rental is as follows:
| Rental income | $23,700 | | Mortgage interest reported on Form 1098 | 16,000 | | Homeowners' association dues | 5,200 | | Utilities | 3,400 | | Maintenance | 6,600 | | Depreciation (assume fully depreciated) | 0 | |
The above amounts do not reflect any allocation between rental and personal use of the condo. The Blacks are active managers of the condo. The Blacks received a $2,400 EIP in 2020.
Required: Complete Form 1040 and the schedules and forms provided for the Blacks.
Assume the taxpayers had health coverage for the entire year.
Neither taxpayers wants to contribute to the presidential election campaign.
If an amount box does not require an entry or the answer is zero, enter "0".
Do not round any percentages.
If required, round your answers to the nearest dollar.
If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.
Special instructions for Form 8582: If required, use the minus sign to enter a "loss" as a negative number on the lines 1d, 4 and 16. However, per the instructions on the tax return, enter all numbers in Part II as positive amounts.
Complete Form 1040 for Walter and Skylar Black.
| Form 1040 | Department of the TreasuryInternal Revenue Service (99) U.S. Individual Income Tax Return | 2020 | OMB No. 1545-0074 | IRS Use Only | | Filing Status SingleMarried filing jointlyMarried filing separately (MFS)Head of household (with qualifying person) (HOH)Qualifying widow(er) (QW) | | Your first name and middle initial Walter | Last name Black | Your social security number 700-01-0002 | | If joint return, spouse's first name and middle initial Skylar | Last name Black | Spouse's social security number 222-43-7690 | | Home address (number and street). If you have a P.O. box, see instructions. 883 Scrub Brush Street | Apt. no. 52B | Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. YouSpouseNone | | City, town, or post office. If you have a foreign address, also complete spaces below. Las Vegas | State NV | ZIP code 89125 | | Foreign country name | Foreign province/state/country | Foreign postal code | | | | | | | | | At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? | YesNo | | Standard Deduction | Someone can claim: You as a dependentYour spouse as a dependentSpouse itemizes on a separate return or you were a dual-status alienNone | | Age/Blindness | You: Were born before January 2, 1956Are blindWere born before January 2, 1956, Are blindNone Spouse: Was born before January 2, 1956Is blindWas born before January 2, 1956, Is blindNone | | Dependents If more than four dependents, see instructions and check here | (see instructions): | (2) Social security number | (3) Relationship to you | (4) if qualifies for (see instructions): | | (1) First name | Last name | Child tax credit | Credit for other dependents | | Rebecca | Backin | 411-66-2121 | Mother | YesNo | YesNo | | Alton | Black | 343-22-8899 | Father | YesNo | YesNo | | | | | | | | | | | | | | Attach Sch. B if required. | 1 | Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1 | fill in the blank | | 2a | Tax-exempt interest . . | 2a | | b | Taxable interest . . . . . . . . . . | 2b | | | 3a | Qualified dividends . . . | 3a | fill in the blank 65795efc4fe6fb3_12 | b | Ordinary dividends . . . . . . . . | 3b | fill in the blank | | 4a | IRA distributions . . . . . | 4a | | b | Taxable amount . . . . . . . . . . | 4b | | | | 5a | Pensions and annuities | 5a | | d | Taxable amount . . . . . . . . . . | 5b | | | Standard Deduction for Single or Married filing separately, $12,400 Married filing jointly or Qualifying widow(er), $24,800 Head of household, $18,650 If you checked any box under Standard Deduction, see instructions. | 6a | Social security benefits | 6a | | b | Taxable amount . . . . . . . . . . | 6b | | | 7 | Capital gain or (loss). Attach Schedule D if required. If not required, check here . . . | 7 | fill in the blank | | 8 | Other income from Schedule 1, line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8 | fill in the blank | | 9 | Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . . . . . . . . . . . . . | 9 | fill in the blank | | 10 | Adjustments to income: | | | | a | From Schedule 1, line 22 . . . . . . . . . . . . . . . . . . . . . . . . . . | 10a | | | | | b | Charitable contributions if you take the standard deduction. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10b | | | | | c | Add lines 10a and 10b. These are your total adjustments to income . . . . . . . . . . . | 10c | | | 11 | Subtract line 10c from line 9. This is your adjusted gross income . . . . . . . . . . . . . . | 11 | fill in the blank 65795efc4fe6fb3_17 | | 12 | Standard deduction or itemized deductions (from Schedule A) . . . . . . . . . . . . . . . . | 12 | fill in the blank 65795efc4fe6fb3_18 | | 13 | Qualified business income deduction. Attach Form 8995 or Form 8995-A . . . . . . . . . . . . | 13 | | | 14 | Add lines 12 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14 | fill in the blank 65795efc4fe6fb3_19 | | | 15 | Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- . . . . . . . . . . . . | 15 | fill in the blank 65795efc4fe6fb3_20 | | For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. | Cat. No. 11320B | Form 1040 (2020) | |
