Individual Tax Return Problem 6

Required:

Use the following information to complete Paige Turners 2021 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps.

Facts:

Paige Turner is single and has two children from her previous marriage. Ali lives with Paige, and Paige provides more than half of her support. Leif lives with his father, Will (Leif lived with Will for all of 2021). Will provides more than half of Leifs support. Paige provides you with the following additional information:

She uses the cash method of accounting and a calendar year for reporting.

She wishes to contribute to the presidential election campaign.

Paige lives at 523 Essex Street, Bangor, Maine 04401.

Paiges birthday is May 31, 1983.A

Alis birthday is October 5, 2012.

Leifs birthday is December 1, 2010.

Paiges Social Security number is 007-11-4727.

Alis Social Security number is 005-11-7232.

Leifs Social Security number is 004-22-3419.

Wills Social Security number is 006-33-6333.

She does not have any foreign bank accounts or trusts.

Paige is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). ASCIs federal employer identification number is 79-1234466. Paiges pay stubs indicate that she had $4,230 withheld in federal taxes, and $4,987 in state taxes, as well as the appropriate Social Security and Medicare taxes. ASCI has an extensive fringe benefits program for its employees.

Paige earned salary of $70,000 before subtracting her 401(k) and flexible spending plan contributions. She contributed $7,000 to her 401(k) account, and she contributed $2,500 to her flexible spending account.

ASCI paid $397 of whole life insurance premiums to cover Paiges personal whole life insurance policy. ASCI also paid health club dues of $900 to a nearby health club on Paiges behalf.

Taking advantage of ASCIs educational assistance program, during the fall Paige enrolled in two graduate engineering classes at a local college. ASCI paid her tuition, fees, and other course-related costs of $2,300.

Paige received free parking in the companys security garage that would normally cost $200 per month.

Paige manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year, Paige was awarded the Employee Safety Award on December 15. The cash award was $500.

On January 15, 2021, Paiges father died. From her fathers estate, she received stock valued at $30,000 (his basis was $12,000) and her fathers house valued at $90,000 (his basis in the house was $55,000).

Paige owns several other investments and in February 2022 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2021:

EXHIBIT A

This is important tax information and is being furnished to the Internal Revenue Service.

1099-DIV Dividends and Distributions
Entity	Description	Amount
General Dynamics	Ordinary/qualified dividends	$300
1099-INT Interest
Entity	Description	Amount
New Jersey Economic Development (bonds)	Interest	$300
IBM	Interest	700
State of Nebraska (bonds)	Interest	700
1098 - Mortgage Interest Statement
Entity	Description	Amount
Sunbelt Credit Union	Mortgage interest	$7,100
Northeast Bank	Mortgage interest	435
Form K-1 (preliminary)
Entity	Description	Amount
Grubstake Mining & Development Corp.	Ordinary income	$2,000
	Distribution	1,000

Paige owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding (S corp. ID number 45-4567890). Grubstake reported taxable income of $200,000 and paid a distribution of $1.00 per share during the current year. Paige tells you that Grubstake typically does not send out its K-1 reports until late April. However, its preliminary report (see Exhibit A) has been consistent with the K-1 for many years. Paige does not materially participate in Grubstakes activities.

Paige slipped on a wet spot in front of a computer store last July. She broke her ankle and was unable to work for two weeks. She incurred $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,000 for pain and suffering resulting from the injury. ASCI continued to pay her salary during the two weeks she missed because of the accident and also paid her $1,200 in disability pay for the time she was unable to work. Under its plan, ASCI pays the premiums for the disability insurance as a nontaxable fringe benefit.

Paige received a Form 1099-B from her broker for the sale of the following securities during 2021. The basis amounts were reported to the IRS.

Security	Sales Date	Purchase Date	Sales Price	Basis
Nebraska state bonds	3/14/2021	10/22/2015	$2,300	$1,89034
Cassill Corp (500 shares)	10/20/2021	2/19/2019	$8,500	$9,760