Comprehensive Tax Return Problems 400 1. Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm. During 2020, the Deans had the following receipts: Salaries ($80,000 for Lance, $61,000 for Wanda) $141,000 Interest income City of Albuquerque general purpose bonds $1,000 Ford Motor Company bonds 1,100 Ally Bank certificate of deposit 2,500 Child support payments from John Allen 9,200 Annual gifts from parents 26,000 Settlement from Roadrunner Touring Company 90,000 Lottery winnings 900 Federal income tax refund (for tax year 2019) 400 Wanda was previously married to John Allen. When they divorced several years ago Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to pay alimony and child support--the alimony payments were to terminate if Wanda remarried. In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settiement of the personal injuries she sustained. $18,200 $3,600 4,200 7,800 The Deans had the following expenditures for 2020: Medical expenses (not covered by insurance) Taxes- Property taxes on personal residence State of New Mexico income tax (includes amount withheld from wages during 2018) Interest on home mortoage (First National Bank) Charitable contributions Life insurance premiums (policy on Lance's life) Contribution to traditional IRA (on Wanda's behalf) Traffic fines Contribution to the reelection campaign fund of the mayor of Santa Fe Funeral expenses for Wayne Boyle 8,000 8,600 1,200 5,000 300 500 6,300 The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution. The Deans' household includes the following for whom they provide more than half of the Pesupport: Social Security Number* Birth Date Lance Dean (age 42) 123-45-6786 12/16/1976 Wanda Dean (age 40) 123-45-6787 08/08/1978 Penny Allen (age 19) 123-45-6788 10/09/1999 Kyle Allen (age 16) 123-45-6789 05/03/2004 Wayne Boyle (age 75) 123-45-6785 06/15/1943 Penny graduated from high school on May 9, 2020, and is undecided about college. Dus 2018, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda's widower father, who died on January 20, 2020. For the past few years, Wayne qualified as a dependent of the Deans. Federal income tax withheld is $4,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. Determine the Federal income tax for 2020 for the Deans on a joint return by completing the appropriate forms. They do not want to contribute to the Presidential Election Campaign Fund. All members of the family had health care coverage for all of 2020. If an overpayment results, it is to be refunded to them. Suggested software: Pro Connect Tax Online or www.efile.com
