INDIVIDUAL TAX RETURN #3 Carla Kropp and David Petry Required Use the following information to complete Carla & Davids 2018 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps. You may need the following forms and schedules to complete the assignment: Form 1040, Schedule 1, Schedule 2, Schedule 3, Schedule 4, Schedule A, Schedule B, Schedule C, Schedule D, Schedule E, and Schedule SE and possibly others. The forms, schedules, and instructions can be found in the Blackboard course under instructor resources or at the IRS Web site (www.irs.gov). The instructions for the forms can be helpful and can be found on the IRS website. Facts: 1. Carla and David are married. Carla is employed as a law partner at the main office of Schroder & Schecter Law firm. David is an artist. Carla and David live in a home they purchased 25 years ago. Carlas two brothers, Connor Kropp and Copper Kropp lived with Carla and David for the entire year. Cooper is disabled and received $4,025 of income this year housesitting for neighbors. Cooper is able to save all of these funds because Carla provides all of Coopers support. Carla also provides all of the support for her brother Connor. Connor is also an artist and sold $3,900 of his work in 2018. Carla and David provided the following additional information: Carla and David live at 2314 Slippery Elm Road, El Paso, TX 79933. Carlas birthday is 6/19/1951 and her Social Security number is 661-65-8962. Davids birthday is 6/21/1949 and his Social Security number is 231-98-7645 Connors birthday is 1/9/1949 and his Social Security number is 631-63-2645. Coopers birthday is 10/7/1953 and his Social Security number is 625-77-6852 Carla and David do not have any foreign bank accounts or trusts. Carla, David, Gary and Donald had health insurance for the entire year. 2. Carla received a Form W-2 from Schroder & Schecter Law firm that contained the following information: Wages: $142,000 Federal income tax withheld: 20,600 Social Security tax withheld: 7,961 Medicare tax withheld: 2,059 State income tax withheld: 0 3. David received a Form W-2 from El Paso Public Library where he teaches art classes with the following information: Wages: $15,000 Federal income tax withheld: 76 Social Security tax withheld: 930 Medicare tax withheld: 218 State income tax withheld: 0 4. David received $12,000 from selling artwork at Ardovinos Desert Crossing Farmers Market. He does not consider this a business, but has all of the receipts related to this additional miscellaneous income. 5. Carla sold some of her stock portfolio to pay for art classes for Connor. She sold 4,250 shares of Lechuga LLC stock for $80 a share on January 26, 2018. She purchased the stock on July 22, 2000, for $51 a share. There was a commission charge of $195 on the sale of these shares. She also sold 5,100 shares of Zanahoria stock for $15 a share on October 5, 2018. She purchased the stock for $52 a share on December 2, 2011. Both of these sales were not reported to her on a 1099-B. 6. Davids uncle, Donald died on March 22, 2013, leaving David his entire estate. Included in the estate was Donalds house (1921 Hickox Street, El Paso, TX 79901). Donalds basis in the residence was $230,000. The fair market value of the residence on the date of his death in 2013 was $314,000. David has used the property as a rental property since he received it and has managed it himself, however he is not a real estate professional. To compute the depreciation on the house, David has allocated $20,000 of the propertys basis to the land and the remaining amount to the house. He has depreciated the house using the MACRS rules and conventions applicable to residential real estate. David collected $36,000 rent in 2018. The house was occupied during the entire year. He did not pay any contract labor that would require form 1099 for work related to this rental house. The net income from this activity qualifies for the Qualified Business Income Deduction. He incurred the following expenses related to the rental house during the year: Property Insurance $3,150 Property Taxes $3,920 Maintenance $4,980 Depreciation To be computed 7. The following is a record of the medical expense that Carla and David paid during the year. The amounts reported are amounts they paid in excess of insurance reimbursements. Medical Insurance premiums $10,200 Hospital fees 5,700 Prescription medications for David 600 Over-the-counter medications 1,250 Doctor and dentists visits 2,275 Eyeglasses 930 8. Carla and David paid $15,630 in mortgage interest during the year to SASS credit union. The loan balance on this loan is $599,000 (original loan was $1,000,000). During the year, they also paid $8,110 in real estate property taxes on their home, and $2,863 on real estate property taxes on vacant land in Ft Davis, TX. 9. Carla and David contributed cash of $8,200 to the Community Church during the year. Community Churchs address is 333 Narrow Way, El Paso, TX 79905. 10. Carla and David paid $6,219 in Texas sales tax this year. They have receipts. 11. Carla paid $12,000 to Chuco Adult Daycare for Coopers care while she was working. Chuco Adult DayCare employer id# is 85-8965231. They are located at 321 Pecan Ave, El Paso, TX 79901