Dominic R. DeMarcantonio, Jr. (age 63 as of December 31, 2021) lives at 3597 Appalachian Trail Drive, Damascus, VA 24236. Dominic lost his late wife, Delilah, in October, 2018 as a result of a commuter airplane crash. At the time of her death, Delilah was age 50. Dominic and Delilah were married for 25 years before her untimely death. Each year that they were married, Dominic and Delilah filed a joint tax return. Dominic is employed as a plumber by DeMarcantonio & Son, Inc., 2486 Country Club Drive, Abingdon, VA 24212. Dominic formerly owned the company, but sold it to his oldest son, Duncan, in 2016. Dominic is now an employee working for Duncan. In 2021, Dominics gross salary received was $99,000. Dominic has maintained qualified health insurance coverage through his employer for the entire year for himself and his dependents. Dominic wants to contribute $3 to the presidential election campaign fund. His daytime phone number is 276-835-1436. If Dominic is owed a refund, he wants it deposited directly into his savings account. The savings account number is 9638527140, and the banks routing number is 031000011. Dominic provided support for the following children who lived with him during 2021 (ages as of December 31, 2021): Desiree (age 24), Damian (age 23), Danica (age 22), Doyle (age 20), and twins Donovan and Daphne (age 17). Desiree Graduated from college 2 years ago. She continues to seek full-time employment. She earned $4,270 working part-time during 2021. Damian Is a full-time law school student who pays his own tuition. He earned $4,370 working part- time during 2021. Danica Graduated from college 1 year ago. She earned $4,470 working as a dancer in an Off- Broadway show during the summer of 2021. Doyle Does not attend school and earned $9,000 during 2021 performing stand-up comedy shows in night clubs. Donovan Attends high school full-time. During 2021, Donovan earned $4,570 working construction during the summer. Daphne Attends high school full-time. During 2021, she earned $1,000 working as a camp counselor during the summer. In addition to his own 6 children who currently live with him, Dominic also supports a nephew, Deon DiCandilo (age 19 as of December 31, 2021), who lived with Dominic throughout 2021. Deon does not attend school and earned $4,670 working during 2021. Dominic provides over half the support of all individuals living with him. Finally, Dominic also supports Delilahs widowed mother, Daisy Davidson (age 82 as of December 31, 2021), who lives in her own house. Daisy earned $4,770 tending bar part-time, but has no other source of income. Dominic has 2 adult children from a previous marriage: Duncan and Dorothy, ages 35 and 33 (at December 31, 2021) respectively. In previous years, Dominic paid child support to his ex-wife until Duncan and Dorothy each reached the age of 18. During 2021, Dominic paid alimony of $410 each month to his ex-wife who has never re-married since the divorce. The date of the divorce is 2/14/1991. His ex-wifes social security number is 864-21-7351. 1

Dominics cash receipts for 2021 include the following: Interest City of Richmond bonds $ 16,700 General Motors Corp. bonds 17,800 Lynchburg National Bank certificate of deposit 18,900 $ 53,400 Dividends Winn-Dixie Corp. stock (qualified) $ 13,200 Trader Joes Corp. stock (qualified) 14,300 Piggly Wiggly Corp. stock (unqualified) 15,400 42,900 Life insurance proceeds 50,000 Inheritance 125,000 Airline settlement Punitive damages $ 150,000 Physical personal injuries 100,000 250,000 The life insurance proceeds were paid to Dominic because he was the beneficiary of a policy he held on Delilahs life. Dominic had purchased the policy that paid $1,000,000 in the event of accidental death. In 2018 shortly after Delilahs death, Dominic elected to receive installment payments of $50,000 each year for a 25-year period. The inheritance represents what was left of Delilahs estate after all debts and administration expenses were paid. Because Dominic believed that Delilahs death was caused by the airlines negligence, he threatened to file a lawsuit against the airline. In a settlement with the airlines insurance carrier, Dominic signed a release of all claims in return for the $250,000 payment. The personal injury portion of the payment was designated as being for the physical personal injuries suffered by Delilah DeMarcantonio. Dominic did not hire an attorney to represent him in this process. On May 17, 2021 Dominic received a $1,900 income tax refund from the state of Virginia for the 2020 tax year. On his 2020 Federal income tax return, he reported total itemized deductions of $25,600, which included a $3,600 state income tax deduction. During 2021, Dominics company experienced a slow period. As a result, Dominic was laid off by his company for 5 weeks. During that time, Dominic collected $560 per week in unemployment compensation. During 2021, Dominic was voted plumber of the year by the Southwestern Virginia chapter of the International Plumbers Association. As a result, he received a $10,000 prize. In addition, during 2021, Dominic bought a $5 raffle ticket and won a laptop computer valued at $2,132. At the age of 24, Dominic purchased a single life annuity from American Travelers Life Insurance Company. He paid $1,200 per month to the insurance company for exactly 35 years. Under the terms of the contract, at the age of 61, Dominic could begin receiving $3,000 per month for the rest of his life. He commenced receiving this annuity in 2019 on his 61st birthday. During 2021, Dominic received $3,000 each month ($36,000 total) from American Travelers Life Insurance Company. 2

Throughout 2021, Dominic was covered by a group term life insurance policy offered by his employer. The employer offers coverage to all employees equal to the employees annual salary. The employer pays the policys premium. Dominics cash payments for 2021 include the following payments that qualify as itemized deductions: Property taxes on personal residence $ 3,300 State and local income taxes paid 3,200 Dominic made no other payments in 2021 that qualified as itemized deductions. Dominic bought a used Cadillac that he used for personal purposes for $14,350 on October 15, 2020. He purchased the vehicle from a friend who needed the cash. On September 12, 2021 he sold the vehicle to someone he did not know for $13,900. In addition, Dominic bought a used German sports car from a different friend for $34,000 on April 16, 2020. He used the car exclusively for personal purposes. On August 11, 2021 he sold the vehicle to an unrelated party for $34,600 because the car did not get good gas mileage. Dominic sold the following securities during 2021, receiving a Form 1099-B from the broker for each transaction. In addition, the IRS received a copy of Form 1099-B for each transaction. However, the Form 1099-B did not include the cost basis for any securities sold. Sales Purchase # of Date Date Price Price Corporation Shares Acquired Sold Per Share Per Share Copper Mountain Corp. 20 3/22/2020 5/13/2021 $31 $26 Arapahoe Basin Corp. 30 4/23/2020 5/14/2021 $23 $36 Aspen Snowmass Corp. 40 5/24/2020 5/15/2021 $19 $41 Purgatory Corp. 50 6/25/2020 5/16/2021 $60 $46 Breckenridge Corp. 60 7/26/2020 5/17/2021 $41 $66 Keystone Corp. 70 8/27/2020 5/18/2021 $45 $59 Telluride, Inc. 80 9/28/2020 5/19/2021 $49 $61 Relevant social security numbers are as follows: Dominic DeMarcantonio 135-98-4321 Delilah DeMarcantonio 246-87-5432 Desiree DeMarcantonio 357-76-6543 Damian DeMarcantonio 468-65-7645 Danica DeMarcantonio 579-54-8756 Doyle DeMarcantonio 680-43-9867 Donovan DeMarcantonio 791-32-0987 Daphne DeMarcantonio 802-21-1076 Deon DiCandilo 803-10-2165 Daisy Davidson 123-97-3256 The total amount of Dominics federal income taxes withheld by his employer in 2021 totaled $34,000. In addition, Dominic applied his 2020 refund of federal income taxes of $1,400 toward his 2021 tax liability. Finally, after receiving the airline settlement, Dominic made an estimated federal income tax payment of $53,000 in 2021. 3

Tax Computation Ignoring the alternative minimum tax (if applicable) and the net investment income tax (if applicable), manually prepare Dominics federal income tax return for 2021 using good form. (Using tax preparation software, including tax preparation software prepared by the IRS, is prohibited. If you have any questions, contact the instructor.) Consider including the following forms and schedules with your return: Form 1040 Schedule 1 (Form 1040) Schedule A (Form 1040) -- Only necessary if taxpayer chooses to itemize deductions. Schedule B (Form 1040) Schedule D (Form 1040) Form 8949 When completing this assignment, you are required to follow these steps: 1. Go to the IRS website: www.irs.gov 2. Click on Forms & Instructions. 3. Click on Current Year (located on the left side). 4. Do a search for a particular IRS form/scheduleor set of IRS instructions (i.e., Form 1040). 5. Click on the link for that IRS form/scheduleor set of IRS instructions (i.e., Form 1040). 6. You will then access a fillable pdf file. 7. Make sure the year on the IRS form/schedule is 2021. If so, then go to step #8. But, if the year is 2022, then go back to step #3 and click on Prior Year rather than Current Year. Then click on List All Prior Year Forms & Instructions. Then do a search for your IRS form/schedule/instructions using the Find box. Make sure the Revision Date is 2021. Then click on the link. 8. Type the information directly into the fillable pdf file. Be sure to save the IRS form/schedule upon completion. In order to do this, you will most likely have to use the print function. After clicking the print icon located in the top right corner of the screen, change the Destination to Adobe PDF. Then save the file. I encourage you to include the IRS form/schedule name (form number or schedule number/letter) in the file name. 9. When you have completed all IRS forms/schedules, print the forms/schedules. 10. Staple the IRS forms/schedules in the sequence required by the IRS (see Hint #9) and submit the paper copy of the return at the start of class on the due date. You are to assume that you are a paid tax practitioner preparing the tax return for your client. Therefore, in addition to including the clients occupation(s), be sure to complete the Paid Preparer Use Only section of page #2 of the Form 1040. It is okay to make-up a fictitious firm name and a fictitious address for this section. Using good form, include the supporting computation for the tax liability; Form 1040, Line 16. Type this computation into a Word file and submit it with the rest of your return. It is not necessary to use the Qualified Dividends and Capital Gain Tax Worksheet located in the Form 1040 IRS Instructions. (Although you may use this worksheet if that is your preference.) Simply do the computation just like we did in class when we did problem 57 from chapter 4. The solution shows that Dominic will be owed a refund of $965. (Note that the instructor has prepared the federal income tax return and feels confident that this check figure is correct, but does not 4

guarantee the accuracy of this amount.) Your answer could be a few dollars different due to either rounding or using the tax rate schedule instead of the tax table (or vice-versa) to compute the tax liability. No points will be deducted for differences due to either one of these two reasons. Hints and Additional Instructions 1. Including Schedule A with the return is only necessary if you choose to itemize deductions. If you choose to use the standard deduction, it is not necessary to include Schedule A. 2. Line 3b on Form 1040 includes both qualified and unqualified dividend income. Line 3a on Form 1040 only includes qualified dividend income. 3. The taxpayer does not qualify for either the child tax credit or the dependent tax credit because the taxpayers adjusted gross income is too high, resulting in both credits being completely phased- out. Therefore, the amount on both lines 19 and 28 on Form 1040 is zero. 4. The amount of the group term life insurance cost provided by the employer that is included in income is explained on page 49 of IRS Publication 17 (2021), and on page 6 of IRS Publication 525 (2021). The amount included in income is considered to be compensation and is included on a taxpayers Form W-2. 5. When life insurance proceeds are received in installments, the tax treatment is explained on page 22 of IRS Publication 525 (2021). 6. The annuity purchased by Dominic is a commercial annuity purchased from an insurance company. Dominic did not purchase the annuity through his employer. Therefore, when determining the taxable portion of annuity payments received during the year, use the General Rule described on pages 1-6 in Publication 939. Do not use the Simplified Method since that method applies to annuities purchased through an employer. 7. On Form 8949, for short-term transactions, check box A, B, or C. For long-term transactions, check box D, E, or F. If both boxes B and C must be checked, and/or both boxes E and F must be checked, then you must include multiple copies of Form 8949: one copy when you check boxes B and/or E, and one copy when you check boxes C and/or F. 8. Although personal use losses are not deductible, they still must be entered on Form 8949 and Schedule D. Follow the instructions on page 9 of the IRS 2021 Instructions for Form 8949, and on page 4 of the IRS 2021 Instructions for Schedule D. 9. Assemble any schedules and forms behind Form 1040 in order of the Attachment Sequence No. This concept is explained on page 64 of the IRS instructions for Form 1040 (2021).