Comprehensive Problem 5-75 (LO 5-1, LO 5-2, LO 5-3) [The following information applies to the questions displayed below] Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. a. Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal) b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. c. Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000. d. Ken received $13,000 in disability benefits for the year. He purchased the disability insurance policy last year. e. Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and tuition, and he applied the rest toward his new car payment. f. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,100 g. Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $6,400 in itemized deductions last year (the standard deduction for a single filer was $6,350) h. Ken received $30,000 of interest from corporate bonds and money market accounts. 1040 |2018 Department of the Treasury-Internal Revenue Service (99) U.S. Individual Income Tax Return OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Married filing jointly Head of household Qualifying widow(er) Filing status: Single Married filing separately Your social security number Your first name and initial Last name You were born before January 2, 1954 You are blind Someone can claim you as a dependent Your standard deduction: joint return, spouse's first name and initial Spouse's social security number Last name Spouse was born before January 2, 1954 Spouse standard deduction: Someone can claim your spouse as a dependent Full-year health care coverage or exempt (see inst.) Spouse is blind Home address (number and street). If you have a P.O. box, see instructions. Spouse itemizes on a separate return you were dual-status alien Apt. no. Presidential Election Campaign (see inst.) You Spouse City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. If more than four dependents, see inst. andhere Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): Child tax credit Credit for other dependents (1) First name Last name Under penalties of perjury, I declare that correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature schedules and statements, and to the best of my knowledge and belief, they are true, Sign Here this return a Your occupation Date t you an Identity Protection PIN, enter it here (see inst.) Joint return? See instructions. Keep a copy for your records Spouse's occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse's signature. If a joint return, both must sign. Date Preparer's signature PTIN Preparer's name Firm's EIN Check if Paid Preparer Use Only 3rd Party Designee Self-employed Firm's name Phone no. Firm's address Form 1040 (2018) For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Fom 1040 (2018) Page 2 Wages, salaries, tips, etc. Attach Form(s) W-2 1 2a Tax-exempt interest b Taxable interest 2b 2a Attach Form/s) W-2, Also attach Form/s) W-2G and 1099-R if tax was 3a Qualified dividends 3a b Ordinary dividends 3b b Taxable amount 4b 4a IRAS, pensions, and annuities 4a withheld. 5a Social security benefits b Taxable amount 5a 5b Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 6 6 7 7 (Standard Deduction for- 8 Standard deduction or itemized deductions (from Schedule A) 8 Single or married filing separately, $12,000 Married filing jointly or Qualifying 11 widow(er) $24,000 Qualified business income deduction (see instructions) 9 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0- (check if any from: 1 10 10 a Tax (see inst.) Form/s) 8814 2 Form 4972 b Add any amount from Schedule 2 and check here 11 12 12 Head of household, $18,000 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 Other taxes. Attach Schedule 4 Total tax. Add lines 13 and 14 If you checked any box under Standard deduction, see instructions. 14 14 15 15 16 16 Federal income tax withheld from Forms W-2 and 1099 17 Refundable credits: a ElC (see inst) b Sch, 8812 c Form 8863 Add any amount from Schedule 5 17 Add lines 16 and 17. These are your total payments 18 18 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 19 Refund 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 20a Direct deposit? See instructions |Checking |Savings cType: b Routing number Account number Amount of line 19 you want applied to your 2019 estimated tax Amount you owe. Subtract line 18s from line 15. For details on how to pay, see instructions Estimated tax penalty (see instructions) 21 21 Amount You Owe 22 23 23 Go to www.irs.gov/Form1040 for instructions and the latest information Form 1040 (2018) 22 A Comprehensive Problem 5-75 (LO 5-1, LO 5-2, LO 5-3) [The following information applies to the questions displayed below] Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. a. Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal) b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. c. Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000. d. Ken received $13,000 in disability benefits for the year. He purchased the disability insurance policy last year. e. Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and tuition, and he applied the rest toward his new car payment. f. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,100 g. Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $6,400 in itemized deductions last year (the standard deduction for a single filer was $6,350) h. Ken received $30,000 of interest from corporate bonds and money market accounts. 1040 |2018 Department of the Treasury-Internal Revenue Service (99) U.S. Individual Income Tax Return OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Married filing jointly Head of household Qualifying widow(er) Filing status: Single Married filing separately Your social security number Your first name and initial Last name You were born before January 2, 1954 You are blind Someone can claim you as a dependent Your standard deduction: joint return, spouse's first name and initial Spouse's social security number Last name Spouse was born before January 2, 1954 Spouse standard deduction: Someone can claim your spouse as a dependent Full-year health care coverage or exempt (see inst.) Spouse is blind Home address (number and street). If you have a P.O. box, see instructions. Spouse itemizes on a separate return you were dual-status alien Apt. no. Presidential Election Campaign (see inst.) You Spouse City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. If more than four dependents, see inst. andhere Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): Child tax credit Credit for other dependents (1) First name Last name Under penalties of perjury, I declare that correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature schedules and statements, and to the best of my knowledge and belief, they are true, Sign Here this return a Your occupation Date t you an Identity Protection PIN, enter it here (see inst.) Joint return? See instructions. Keep a copy for your records Spouse's occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse's signature. If a joint return, both must sign. Date Preparer's signature PTIN Preparer's name Firm's EIN Check if Paid Preparer Use Only 3rd Party Designee Self-employed Firm's name Phone no. Firm's address Form 1040 (2018) For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Fom 1040 (2018) Page 2 Wages, salaries, tips, etc. Attach Form(s) W-2 1 2a Tax-exempt interest b Taxable interest 2b 2a Attach Form/s) W-2, Also attach Form/s) W-2G and 1099-R if tax was 3a Qualified dividends 3a b Ordinary dividends 3b b Taxable amount 4b 4a IRAS, pensions, and annuities 4a withheld. 5a Social security benefits b Taxable amount 5a 5b Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 6 6 7 7 (Standard Deduction for- 8 Standard deduction or itemized deductions (from Schedule A) 8 Single or married filing separately, $12,000 Married filing jointly or Qualifying 11 widow(er) $24,000 Qualified business income deduction (see instructions) 9 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0- (check if any from: 1 10 10 a Tax (see inst.) Form/s) 8814 2 Form 4972 b Add any amount from Schedule 2 and check here 11 12 12 Head of household, $18,000 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 Other taxes. Attach Schedule 4 Total tax. Add lines 13 and 14 If you checked any box under Standard deduction, see instructions. 14 14 15 15 16 16 Federal income tax withheld from Forms W-2 and 1099 17 Refundable credits: a ElC (see inst) b Sch, 8812 c Form 8863 Add any amount from Schedule 5 17 Add lines 16 and 17. These are your total payments 18 18 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 19 Refund 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 20a Direct deposit? See instructions |Checking |Savings cType: b Routing number Account number Amount of line 19 you want applied to your 2019 estimated tax Amount you owe. Subtract line 18s from line 15. For details on how to pay, see instructions Estimated tax penalty (see instructions) 21 21 Amount You Owe 22 23 23 Go to www.irs.gov/Form1040 for instructions and the latest information Form 1040 (2018) 22 A
