Comprehensive Problem 6-52 (LO 6-1, LO 6-2, LO 6-3)

[The following information applies to the questions displayed below.]

Read the following letter and help Shady Slim with his tax situation. Please assume that his gross income is $172,900 (which consists only of salary) for purposes of this problem.

December 31, 2019

To the friendly student tax preparer:

Hi, its Shady Slim again. I just got back from my 55th birthday party, and Im told that you need some more information from me in order to complete my tax return. Im an open book! Ill tell you whatever I think you need to know.

Let me tell you a few more things about my life. As you may recall, I am divorced from my wife, Alice. I know that it's unusual, but I have custody of my son, Shady, Jr. The judge owed me a few favors and I really love the kid. He lives with me full-time and my wife gets him every other weekend. I pay the vast majority of my son's expenses. I think Alice should have to pay some child support, but she doesn't have to pay a dime. The judge didn't owe me that much, I guess.

I had to move this year after getting my job at Roca Cola. We moved on February 3 of this year, and I worked my job at Roca Cola for the rest of the year. I still live in the same state, but I moved 500 miles away from my old house. I hired a moving company to move our stuff at a cost of $2,300, and I drove Junior in my car. Junior and I got a hotel room along the way that cost us $65 (I love Super 8!).

Can you believe Im still paying off my student loans, even after 15 years? I paid a total of $900 in interest on my old student loans this year.

Remember when I told you about that guy that hit me with his car? I had a bunch of medical expenses that were not reimbursed by the lawsuit or by my insurance. I incurred a total of $20,000 in medical expenses, and I was only reimbursed for $11,000. Good thing I can write off medical expenses, right?

I contributed a lot of money to charity this year (and have receipt documentation for all contributions). Im such a nice guy! I gave $1,000 in cash to the March of Dimes. I contributed some of my old furniture to the church. It was some good stuff! I contributed a red velvet couch and my old recliner. The furniture is considered vintage and is worth $5,000 today (the appraiser surprised me!), even though I only paid $1,000 for it back in the day. When I contributed the furniture, the pastor said he didnt like the fabric and was going to sell the furniture to pay for some more pews in the church. Oh well, some people just have no taste, right? Roca Cola had a charity drive for the United Way this year and I contributed $90. Turns out, I dont even miss it, because Roca Cola takes it right off my paycheck every month . . . $15 a month starting in July. My pay stub verifies that I contributed the $90 to the United Way. Oh, one other bit of charity from me this year. An old buddy of mine was down on his luck. He lost his job and his house. I gave him $500 to help him out.

I paid a lot of money in interest this year. I paid a total of $950 in personal credit card interest. I also paid $18,000 in interest on my $500,000 home mortgage that helped me buy my dream home. I also paid $2,000 in real estate taxes for my new house.

A few other things I want to tell you about this year. Someone broke into my house and stole my kid's brand new bicycle and my set of golf clubs. The total loss from theft was $900. I paid $125 in union dues this year. I had to pay $1,200 for new suits for my job. Roca Cola requires its managers to wear suits every day on the job. I spent a total of $1,300 to pay for gas to commute to my job this year.

Oh, this is pretty cool. I've always wanted to be a firefighter. I spent $1,400 in tuition to go to the local firefighter's school. I did this because someone told me that I can deduct the tuition as an itemized deduction, so the money would be coming back to me.

That should be all the information you need right now. Please calculate my taxable income and complete pages 1 and 2 of Form 1040 (through taxable income, line 10) and Schedule A. You're still doing this for free, right?

Comprehensive Problem 6-52 Part b

Complete pages 1 and 2 of Form 1040 (through taxable income, line 10) and Schedule A.

Shady Slims address is 19010 N.W. 135th Street, Miami, FL 33054.

Social security numbers:

Shady Slim: 123-45-6789 Shady Slim,Jr: 222-22-2222

(Round your intermediate computations to the nearest whole dollar amount. Input all the values as positive numbers. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement. Use 2019 tax rules regardless of year on form)

Please provide the form portions that need to be filled in as this not complete or correct.

Page 1 of Form 1040. Use provided information and follow instructions on form. Form 1040 Department of the TreasuryInternal Revenue Service (99) U.S. Individual Income Tax Return O Single Married filing jointly 2018 Filing status: OMB No. 1545-0074 Married filing separately Head of household Last name Slim You were born before January 2, 1954 You are blind IRS Use Only-Do not write or staple in this space Qualifying widow(er) Your social security number (Enter as xxx-xx-xxxx) 123-45-6789 Your first name and initial Shady Your Standard deduction: Someone can claim you as a dependent If joint return, spouse's first name and initial Last name Spouse's social security number (Enter as XXX-XX-XXXX) Full-year health care coverage or exempt (see inst.) Spouse standard Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 deduction: Spouse is blind D Spouse itemizes on a separate return or you were dual-status alien Home address (number and street). If you have a P.O. box, see instructions Apt. no. 19010 N.W. 135th Street; City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. HOPA Presidential Election Campaign Check here if you want S3 to go to this fund (see inst.) You Spouse If more than four dependents, see inst. and here Dependents (see instructions): (4) Vif child under age 17 qualifies for (see inst.): (2) Dependent's social security number (Enter as XX-XX-XOXOX) (3) Dependent's relationship to you Last name Child tax credit. (1) First name Shady Credit for other dependents Slim, Jr. 222-22-2222 Son Sign 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, 12 U11 U10 TU Form 1040 (2018) Page 2 172,900 1 Wages, salaries, tips, etc. Attach Form(s) W-2 2a Tax-exempt interest Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 3a Qualified dividends 4a IRAs, pensions, and annuities 5a Social security benefits 5a 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 b Taxable interest b Ordinary dividends b Taxable amount b Taxable amount 172,900 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6, otherwise, subtract Schedule 1, Standard deduction for- Single or Married filing separately, $12.000 172,900 22,090 150,810 Married filing jointly or Qualifying widow(er), $24,000 2. Form 4972 Head of household, $18,000 If you checked any box under Standard deduction, see instructions line 36, from line 6 8 Standard deduction or itemized deductions (from Schedule A) 9 Qualified business income deduction (see instructions) 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter-O- 11 a Tax (see inst.) check if any from: 0 1. Form(s) 8814 N 3. b Add any amount from Schedule 2 and check here 12 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-O- 14 Other taxes. Attach Schedule 4 15 Total tax. Add lines 13 and 14 16 Federal income tax withheld from Forms W-2 and 1099 17 Refundable a EIC (see inst.) b Sch. 8812 credits: c Form 8863 d Add any amount from Schedule 5 18 Add lines 16 and 17. These are your total payments. 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here Routing Type: Checking number >d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax 21 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions 23 Estimated tax penalty (see instructions) Refund Savings Direct deposit? See instructions. 22 Amount You Owe ...23 OMB No. 1545-0074 2018 Attachment Sequence No. 07 SCHEDULE A Itemized Deductions (Form 1040) Department of the Treasury Go to www.irs.gov/Schedule A for instructions and the latest information. Attach to Form 1040. Internal Revenue Service (99) Caution: If you are claiming a net qualified disaster loss on Form 4684, see the instructions for line 16 Name(s) shown on Form 1040 Shady Slim Medical and Caution. Do not include expenses reimbursed or paid by others. Dental Expenses 1 Medical and dental expenses (see instructions) 9,000 2 Enter amount from Form 1040, line 7 172,900 Your social security number 123-45-6789 0 3 Taxes You Paid 3 Multiply line 2 by 10% (0.10) 4 Subtract line 3 from line 1. If line 3 is more than line 1, enter-O- 5 State and local taxes a State and local income taxes or general sales taxes. You may include either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box b State and local real estate taxes (see instructions) c State and local personal property taxes d Add lines 5a through 5c e Enter the smaller of line 5d and $10,000 ($5,000 if married filing separately) 6 Other taxes. List type and amount 2,000 2,000 7 Interest You Paid Caution: 7 Add lines 5e and 6 8 Home mortgage interest and points. If you didn't use all of your home mortgage loan(s) to buy, build, or improve your home, see instructions and check this box a Home mortgage interest and points reported to you on Form 1098 b Home mortgage interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address 18,000 Your mortgage interest deduction may be limited (see instructions) 8b ..........Brinchrotherhorstrom .r rrwotnAYATI ... . ....... .. Interest You Paid Caution: Sa 18,000 8 Home mortgage interest and points. If you didn't use all of your home mortgage loan(s) to buy, build, or improve your home, see instructions and check this box a Home mortgage interest and points reported to you on Form 1098 b Home mortgage interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address Your mortgage interest deduction may be limited (see instructions) C Points not reported to you on Form 1098. See instructions for special rules d Reserved e Add lines 8a through 8c 9 Investment interest. Attach Form 4952 if required. (see instructions) 10 Add lines 8e and 9 10 13 14 2.090 Gifts to Charity 11 Gifts by cash or check. If you made any gift of $250 or more, see instructions 1,090 12 Other than by cash or check. If any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 If you made a gift 1,000 and got a benefit for 13 Carryover from prior year it, see instructions. 14 Add lines 11 through 13 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form Casualty and 4684 Theft Losses and enter the amount from line 18 of that form. See instructions Other Itemized 16 Otherfrom list in instructions. List type and amount Deductions 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Form 1040, line 8 Total Itemized Deductions 18 If you elect to itemize deductions even though they are less than your standard deduction, check here For Paperwork Reduction Act Notice, see the Instructions for Form 1040. Cat. No. 17145C 16 17 2,090 0 Schedule A (Form 1040) 2018