Creating a Tax Return:

Luis Perez is an instructor at the City Colleges of Chicago. Luis is in his 20s and enjoying it! He was married to Sandra on January 1, 2006. Sandra is a full-time student and also in her 20s. Due to irreconcilable differences they were divorced on December 31, 2020. The divorce decree provided the following:

A condominium purchased for $80,000 by Luis several years ago with a fair market value of $125,000 transferred to Sandra on December 31, 2020. This condo was previously used as a second home by Luis and Sandra. Monthly payments to Sandra of $750 beginning January 31, 2021 and ending at the date of her death.

Luis did not remarry in 2020 considering he did not have sufficient time to find a new candidate. Luis social security number is 111-33-1112. Sandras social security number is 111-33- 1113. Luis current address is 30 E. Lake Street, Chicago, IL 60601 Luis has the following income and withholding information from his full-time position as an educator:

Salary from City Colleges of Chicago $40,000 Federal income tax withholding 6,000 Federal social security and medicare tax withholding 3,672 State income tax withholding 1,200 Luis has the following information available for banking activities: Interest income from Escandalo Bank 150 Interest income from City of Chicago Municipal Bonds 375 Interest income from redeemed U.S. Savings Bonds 525 Luis has the following information expenditures: Mortgage Interest 7,500 Credit Card Interest 600 Real Estate Taxes 3,400 Cash Charitable Contributions to qualified charities 800 Non-cash Charitable Contributions to qualified charities 450 Cash Charitable Contributions to homeless on street 100 Political Contributions 250

On June 27, 2020, Luis received stock valued at $30,000 as an inheritance from his deceased uncle, Samuel. Samuel purchased the stock several years ago at $1,000. Luis occasion visits casinos for recreational purposes. His total winnings for 2020 for playing slot machines were $1,150. The casino was required to withhold federal income tax of $150. Luis is also a big professional football fan and participates in an office pool at his job. During the year he won $600 from the office football pool. Total gambling losses for the year was $3,600. Luis is an avid chess player and participates in tournaments periodically. During 2020, he participated in 3 tournaments and was awarded a cash prize of $750. Mr. Perez is also a fitness fanatic. He participates in several races throughout the year. In a local marathon race he came in first in his age group and won a GPS watch valued at $300. Mr. Perez also received birthday gifts from his family, friends, and former students totaling $2,000. Luis birthday is December 26th . Mr. Perez received $1,200 for the first economic impact payment and $600 for the second economic impact payment.

Requirements: 1. Prepare a federal tax return including supporting schedules for Luis using the tax forms, relevant amounts, and tax rates for tax year 2020. 2. Use the fill-in tax forms found at the IRS web site (www.irs.gov). You are not allowed to use a tax preparation software. 3. Make sure you include a separate page showing the income tax computation using the tax rate schedules for 2020. 4. If you believe there items that should be reported on other income, prepare a separate schedule listing those amounts individually along with a total. Include a heading with: name of the taxpayer, social security number, tax year 2020, and tax form 1040. Line 8.