Comprehensive Problem 4-2B Professor Patricia (Patty) Pt is retired from the Palm Springs Culinary Arts Academy (PSCAA). She is a single taxpayer and is 68 years old. Patty lives at 98 Colander Street, Henderson, NV 89052. Professor Pt's Social Security number is 565-66-9378. Patty receives monthly retirement benefits from her PSCAA retirement plan. Earnings and income tax withholding shown on her retirement 2015 Form 1099-R are: Gross distribution and taxable amount $62,100 Federal tax withheld 7,350 State tax withheld 0 Patricia owns a rental condo located at 392 Spatula Way, Mount Charleston, NV 89124. The condo rents for $850 per month and was rented for the entire year. The following are the related expenses for the rental house: Real estate taxes $3,835 Mortgage interest 8,613 Insurance 561 Depreciation (assume fully depreciated) 0 Homeowners'Association dues 1,260 Repairs 1,195 Gardening 560 The condo was purchased on August 31, 1977. Professor Pt handles all rental activities (e.g., rent collection, finding tenants, etc.) herself. During March 2015, Patricia took an $82,000 distribution from her 401(k) plan. Patricia received only $65,600 because the 401(k) plan administrators withheld $16,400 federal income tax from the distribution. Forty-five days after the distribution, Patricia deposited $58,000 in a rollover IRA, keeping $7,600 of the $65,600 received in order to remodel her kitchen. Click here to access the tax table to use for this problem. Required: Complete Professor Pt's federal tax return for 2015. Use Form 1040, Schedule E, and Form 8582 to complete this tax return. Do not complete Form 4562 for reporting depreciation. Make realistic assumptions about any missing data. Note: Enter all amounts as positive numbers except for the following special instructions: If required, on Form 1040, line 17 and on Schedule E, on lines 21, 25, and 26, use the minus sign to indicate a loss . On Form 8582, if required, use the minus sign to enter a "loss" as a negative number on the lines 1d and 4. However, per the instructions on the tax return, enter all numbers in Part II as positive amounts. Form 1040 Department of the TreasuryInternal Revenue Service (99) U.S. Individual Income Tax Return 2015 OMB No. 1545-0074 IRS Use Only For the year Jan. 1Dec. 31, 2015, or other tax year beginning , 2015, ending , 20 See separate instructions. Your first name and initial Patricia Last name Pt Your social security number 565-66-9378 If a joint return, spouse's first name and initial Last name Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. 98 Colander Street Apt. no. Make sure the SSN(s) above and on line 6c are correct. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Henderson, NV 89052 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. You Spouse Foreign country name Foreign province/state/country Foreign postal code Filing Status Single Exemptions 6a Yes Yourself. If someone can claim you as a dependent, do not check box 6a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } Boxes checked on 6a and 6b b No Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No. of children on 6c who: lived with you c Dependents: (2) Dependent's social security number (3) Dependent's relationship to you (4) If child under age 17 qualifying for child tax credit (see instructions) (1) First name Last name did not live with you due to divorce or separation (see instructions) If more than four dependents, see instructions and check here Dependents on 6c not entered above Add numbers on lines above d Total number of exemptions claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions. 7 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8a Taxable interest. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8a b Tax-exempt interest. Do not include on line 8a . . . . . . . . . 8b 9a Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9a b Qualified dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9b 10 Taxable refunds, credits, or offsets of state and local income taxes . . . . . . . . . . . . . . . . 10 11 Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 14 Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15a IRA distributions . . . . . . . . . . . 15a b Taxable amount . . . 15b 16a Pensions and annuities . . . . . . 16a b Taxable amount . . . 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 20a Social security benefits 20a b Taxable amount . . . 20b 21 Other income. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 21 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income 22 Adjusted Gross Income 23 Educator expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ 24 25 Health savings account deduction. Attach Form 8889 . . . . . 25 26 Moving expenses. Attach Form 3903 . . . . . . . . . . . . . . . . . . 26 27 Deductible part of self-employment tax. Attach Schedule SE 27 28 Self-employed SEP, SIMPLE, and qualified plans . . . . . . . . . 28 29 Self-employed health insurance deduction . . . . . . . . . . . . . 29 30 Penalty on early withdrawal of savings . . . . . . . . . . . . . . . . 30 31a Alimony paid b Recipient's SSN ________ 31a 32 IRA deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 33 Student loan interest deduction . . . . . . . . . . . . . . . . . . . . . 33 34 Tuition and fees. Attach Form 8917 . . . . . . . . . . . . . . . . . 34 35 Domestic production activities deduction. Attach Form 8903 35 36 Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 37 Subtract line 36 from line 22. This is your adjusted gross income . . . . . . . . . . . . . . 37 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2015) Form 1040 (2015) Patricia Pt 565-66-9378 Page 2 38 Amount from line 37 (adjusted gross income) 38 Tax and Credits 39a Check if: { You were born before January 2, 1951, Blind. Spouse was born before January 2, 1951, Blind. } Total boxes checked 39a b If your spouse itemizes on a separate return or you were a dual-status alien, check here 39b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Standard Deduction for People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions. All others: Single or Married filing separately, $6,300 Married filing jointly or Qualifying widow(er), $12,600 Head of household, $9,250 40 Itemized deductions (from Schedule A) or your standard deduction (see left margin) 40 41 Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 42 Exemptions. If line 38 is $154,950 or less, multiply $4,000 by the number on line 6d. Otherwise, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 43 Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0- 43 44 Tax (see instructions). Check if any from: a Form(s) 8814 b Form 4972 c _____ 44 45 Alternative minimum tax (see instructions). Attach Form 6251 . . . . . . . . . . . . . . . . . 45 46 Excess advance premium tax credit repayment. Attach Form 8962 . . . . . . . . . . . . . . . . . 46 47 Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 48 Foreign tax credit. Attach Form 1116 if required . . . . . . . . . . . . . . 48 49 Credit for child and dependent care expenses. Attach Form 2441 49 50 Education credits from Form 8863, line 19 . . . . . . . . . . . . . . . . . . 50 51 Retirement savings contributions credit. Attach Form 8880 . . . . . 51 52 Child tax credit. Attach Schedule 8812, if required . . . . . . . . . . . . 52 53 Residential energy credit. Attach Form 5695 . . . . . . . . . . . . . . 53 54 Other credits from Form: a 3800 b 8801 c ________ 54 55 Add lines 48 through 54. These are your total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 56 Subtract line 55 from line 47. If line 55 is more than line 47, enter -0- . . . . . . . . . . . . . . 56 Other Taxes 57 Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 58 Unreported social security and Medicare tax from Form: a 4137 b 8919 . . . . . . . . . 58 59 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required 59 60a Household employment taxes from Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60a b First-time homebuyer credit repayment. Attach Form 5405 if required . . . . . . . . . . . . . . 60b 61 Health care: individual responsibility (see instructions) Full-year coverage 61 62 Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) _ _ _ _ _ _ 62 63 Add lines 56 through 62. This is your total tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Payments 64 Federal income tax withheld from Forms W-2 and 1099 . . . . . . . . . 64 If you have a qualifying child, attach Schedule EIC. 65 2015 estimated tax payments and amount applied from 2014 return 65 66a Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 66a b Nontaxable combat pay election . . . . . . . . . 66b 67 Additional child tax credit. Attach Schedule 8812 . . . . . . . . . . . . . . 67 68 American opportunity credit from Form 8863, line 8 . . . . . . . . . . . . 68 69 Net premium tax credit. Attach Form 8962 . . . . . . . . . . . . . . . . . . . 69 70 Amount paid with request for extension to file . . . . . . . . . . . . . . . . 70 71 Excess social security and tier 1 RRTA tax withheld . . . . . . . . . . . . 71 72 Credit for federal tax on fuels. Attach Form 4136 . . . . . . . . . . . . . . 72 73 Credits from Form: a 2439 b Reserved c 8885 d 73 74 Add lines 64, 65, 66a, and 67 through 73. These are your total payments . . . . . . . . . . 74 Refund 75 If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid 75 76a Amount of line 75 you want refunded to you. If Form 8888 is attached, check here 76a Direct deposit? See instructions. b Routing number c Type: Checking Savings d Account number 77 Amount of line 75 you want applied to your 2016 estimated tax 77 Amount You Owe 78 Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 79 Estimated tax penalty (see instructions) . . . . . . . . . . . . . . . . . . . . 79 Third Party Designee Do you want to allow another person to discuss this return with the IRS (see instructions)? Yes. Complete below. No Designee's name Phone no. Personal identification number (PIN) Sign Here Joint return? See instructions. Keep a copy for your records. Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Patricia Pt Date Your occupation Retired Daytime phone number Spouse's signature. If a joint return, both must sign. Date Spouse's occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Paid Preparer Use Only Print/Type preparer's name Preparer's signature Date Check if self-employed PTIN Firm's name Firm's EIN Firm's address Phone no. www.irs.gov/form1040 Form 1040 (2015) SCHEDULE E (Form 1040) Department of the Treasury Internal Revenue Service (99) Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.) Attach to Form 1040, 1040NR, or Form 1041. Information about Schedule E and its separate instructions is at www.irs.gov/schedulee. OMB No. 1545-0074 2015 Attachment Sequence No. 13 Name(s) shown on return Patricia Pt Your social security number 565-66-9378 Part I Income or Loss From Rental Real Estate and Royalties Note: If you are in the business of renting personal property, use Schedule C or C-EZ (see instructions). If you are an individual, report farm rental income or loss from Form 4835 on page 2, line 40. A Did you make any payments in 2015 that would require you to file Form(s) 1099? (see instructions) Yes No B If "Yes," did you or will you file required Forms 1099? Yes No 1a Physical address of each property (street, city, state, ZIP code) A 392 Spatula Way, Mount Charleston, NV 89124 B C 1b Type of Property (from list below) 2 For each rental real estate property listed above, report the number of fair rental and personal use days. Check the QJV box only if you meet the requirements to file as a qualified joint venture. See instructions. Fair Rental Days Personal Use Days QJV A A B B C C Type of Property: 1 Single Family Residence 3 Vacation/Short-Term Rental 5 Land 7 Self-Rental 2 Multi-Family Residence 4 Commercial 6 Royalties 8 Other (describe) Income: Properties: A B C 3 Rents received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Royalties received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Expenses: 5 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 Auto and travel (see instructions) . . . . . . . . . . . . . . . . . . . . . 6 7 Cleaning and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10 Legal and other professional fees . . . . . . . . . . . . . . . . . . . . . 10 11 Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 Mortgage interest paid to banks, etc. (see instructions) . . . . 12 13 Other interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 Depreciation expense or depletion . . . . . . . . . . . . . . . . . . . . 18 19 Other (list) Association Dues, Gardening 19 20 Total expenses. Add lines 5 through 19 . . . . . . . . . . . . . . . . 20 21 Subtract line 20 from line 3 (rents) and/or 4 (royalties). If result is a (loss), see instructions to find out if you must file Form 6198 21 ( ) 22 Deductible rental real estate loss after limitation, if any, on Form 8582 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . 22 ( ) ( ) ( ) 23a Total of all amounts reported on line 3 for all rental properties . . . . . . . . . . . . . . . 23a b Total of all amounts reported on line 4 for all royalty properties . . . . . . . . . . . . . . 23b c Total of all amounts reported on line 12 for all properties . . . . . . . . . . . . . . . . . . . 23c d Total of all amounts reported on line 18 for all properties . . . . . . . . . . . . . . . . . . . 23d e Total of all amounts reported on line 20 for all properties . . . . . . . . . . . . . . . . . . . 23e 24 Income. Add positive amounts shown on line 21. Do not include any losses . . . . . . . . . . . . . . . . . . . 24 25 Losses. Add royalty losses from line 21 and rental real estate losses from line 22. Enter total losses here 25 ( ) 26 Total rental real estate and royalty income or (loss). Combine lines 24 and 25. Enter the result here. If Parts II, III, IV, and line 40 on page 2 do not apply to you, also enter this amount on Form 1040, line 17, or Form 1040NR, line 18. Otherwise, include this amount in the total on line 41 on page 2 . . . . . . . 26 ( ) For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11344L Schedule E (Form 1040) 2015 Form 8582 Department of the Treasury Internal Revenue Service (99) Passive Activity Loss Limitations See separate instructions. Attach to Form 1040 or Form 1041. Information about Form 8582 and its instructions is available at www.irs.gov/form8582. OMB No. 1545-1008 2015 Attachment Sequence No. 88 Name(s) shown on return Patricia Pt Identifying number 565 - 66 - 9378 Part I 2015 Passive Activity Loss Caution: Complete Worksheets 1, 2, and 3 before completing Part I. Rental Real Estate Activities With Active Participation (For the definition of active participation, see Special Allowance for Rental Real Estate Activities in the instructions.) 1a Activities with net income (enter the amount from Worksheet 1, column (a)) 1a b Activities with net loss (enter the amount from Worksheet 1, column (b)) 1b ( ) c Prior years unallowed losses (enter the amount from Worksheet 1, column (c)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1c ( ) d Combine lines 1a, 1b, and 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1d ( ) Commercial Revitalization Deductions From Rental Real Estate Activities 2a Commercial revitalization deductions from Worksheet 2, column (a) . . . . 2a ( ) b Prior year unallowed commercial revitalization deductions from Worksheet 2, column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2b ( ) c Add lines 2a and 2b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2c ( ) All Other Passive Activities 3a Activities with net income (enter the amount from Worksheet 3, column (a)) 3a ( ) b Activities with net loss (enter the amount from Worksheet 3, column (b)) 3b ( ) c Prior years unallowed losses (enter the amount from Worksheet 3, column (c)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3c ( ) d Combine lines 3a, 3b, and 3c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3d 4 Combine lines 1d, 2c, and 3d. If this line is zero or more, stop here and include this form with your return; all losses are allowed, including any prior year unallowed losses entered on line 1c, 2b, or 3c. Report the losses on the forms and schedules normally used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ( ) If line 4 is a loss and: Line 1d is a loss, go to Part II. Line 2c is a loss (and line 1d is zero or more), skip Part II and go to Part III. Line 3d is a loss (and lines 1d and 2c are zero or more), skip Parts II and III and go to line 15. Caution: If your filing status is married filing separately and you lived with your spouse at any time during the year, do not complete Part II or Part III. Instead, go to line 15. Part II Special Allowance for Rental Real Estate Activities With Active Participation Note: Enter all numbers in Part II as positive amounts. See instructions for an example. 5 Enter the smaller of the loss on line 1d or the loss on line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 Enter $150,000. If married filing separately, see instructions . . . . . . . . . . 6 7 Enter modified adjusted gross income, but not less than zero (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Note: If line 7 is greater than or equal to line 6, skip lines 8 and 9, enter -0- on line 10. Otherwise, go to line 8. 8 Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 Multiply line 8 by 50% (.5). Do not enter more than $25,000. If married filing separately, see instructions 9 10 Enter the smaller of line 5 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 If line 2c is a loss, go to Part III. Otherwise, go to line 15. Part III Special Allowance for Commercial Revitalization Deductions From Rental Real Estate Activities Note: Enter all numbers in Part III as positive amounts. See the example for Part II in the instructions. 11 Enter $25,000 reduced by the amount, if any, on line 10. If married filing separately, see instructions 11 12 Enter the loss from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Reduce line 12 by the amount on line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Enter the smallest of line 2c (treated as a positive amount), line 11, or line 13 . . . . . . . . . . . . . . 14 Part IV Total Losses Allowed 15 Add the income, if any, on lines 1a and 3a and enter the total. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 Total losses allowed from all passive activities for 2015. Add lines 10, 14, and 15. See instructions to find out how to report the losses on your tax return . . . . . . . . . . . . . . . . . . . . . . . 16 For Paperwork Reduction Act Notice, see instructions. Cat. No. 63704F Form 8582 (2015)