Joseph (age 52) and Diana (age 54) Cohen are married and live in Pleasantville, New Jersey. Joseph is the Vice-President of Sales at a small start-up company. Diana is a former advertising executive who currently consults with former clients. The Cohens have three children Rebecca (age 18), Alan (age 15), and David (age 12). In January, Rebecca left home to attend a liberal arts college. The Cohens pay for Rebeccas tuition and room in board while she takes classes full time; she is not currently employed. The Cohens provided the following information: Josephs social security number is 598-94-2583 Dianas social security number is 301-52-2942 Rebeccas social security number is 887-44-8710 Alans social security number is 810-42-9092 Davids social security number is 855-11-3021 The Cohens mailing address is 85 North Maple Drive, Pleasantville, New Jersey 08232 Joseph Cohen reported the following the following information relating to his employment during the year: Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding Alternative Energy $148,325 $35,230 $8,900 The above amounts do not reflect any income items described below. Josephs employer withheld all payroll taxes it was required to withhold. The entire Cohen family was covered by minimum essential health insurance during each month in 2020. The insurance, valued at $16,000, was provided by Josephs employer, Alternative Energy. Diana Cohen received the following self-employment income during the year (she uses the cash method of accounting). Consulting revenue reported to her on a Form 1099-MISC, Box 7 High-end Retail $32,000 Jensens Health Products $8,500 Strategic Solutions $3,750 In this self-employment endeavor, Diana is an active participant and the activities qualify as trade or businesses for the Qualified Business Income Deduction. Unfortunately, Diana did not keep records of any of her business expenses for the year. The Cohens also received the following during the year: Interest income from First Bank of New Jersey $320 Interest income from Patterson, New Jersey School District $200 Interest income from U.S. Treasury Bond $350 Interest income from General Mills corporate bond $400 Interest income from the State of Maines Tourism Support Private Activity Bond $50,000 Qualified dividend income from Rio Tinto $1,500 Qualified dividend income from Microsoft $750 Qualified dividend income from Cooper Tire $200 Qualified dividend income from Cardinal Health $425 Qualified dividend income from Union Pacific $140 Qualified dividend income from Procter & Gamble $190 Qualified dividend income from PepsiCo $225 Qualified dividend income from Kellogg $200 Qualified dividend income from Abbott Labs $275 Qualified dividend income from 3M $350 Life insurance payment Mutual life (mothers passing) $150,000 Cash gift from her father $5,000 New Jersey state income tax refund* $325 * Refund was from state tax they paid in 2019. They deducted all of their state taxes as itemized deductions in 2019. Total itemized deductions were $32,000, $3,000 of which were state taxes. Diana received the following payments as a result of a lawsuit she filed for damages sustained in a car accident: Medical Expenses for physical injuries $16,500 Emotional Distress (from having been physically injured) $7,300 Punitive Damages $30,000 Total $53,800 Eight years ago, Joseph purchased an annuity contract for $88,000. He received his first annuity payment on January 1, 2020. The annuity will pay Joseph $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Joseph on Form 1099-R for the current year. On January 3, 2020, the Cohens sold their prior principal residence. They purchased that residence in 2011 and had lived there full-time until they sold it this year. They originally purchased the home for $310,000. The Cohen family has never claimed any tax depreciation (nor were they allowed to) on the home. The sales price of the home was $825,000. The home is located at 45 East Entrada Trail, Lexington New Jersey 40502. The Cohens took two trips to Atlantic City. While on the first trip they lost $2800 gambling, but on the second trip they won $2600. The Cohens did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year. The Cohens made the following payments during 2020: Dentist (unreimbursed by insurance) $1,500 Doctors (unreimbursed by insurance) $475 Prescriptions (unreimbursed by insurance) $255 Real property taxes on residence $4,200 Vehicle registration fee (based on age of the vehicle) $175 Mortgage interest on principle residence $7,845 Contribution to the American Lung Association $2,300 Contribution to the Habitat for Humanity $1,200 Contribution to Methodist Church of NJ $3,000 Contribution to Senator Rick Hartleys Re-election Campaign $2,500 During the year, Joseph paid $16,600 in alimony and child support payments to a former spouse, Natalie (SSN #568-72-8787), whom he divorced in 2014. When his daughter Wendy (SSN #568-72-666), who lives with her mother full-time, reaches the age of 18 the payments will drop to $5,600. The Cohens had the following activity in their brokerage account during the year (all transactions were reported on a Form 1099-B and basis information for each stock sale was reported to the IRS): Sold 2,000 shares of Microsoft 7/1/20 $22,500 Sold 75 shares of Apple, Inc. 4/15/20 $28,750 Sold 300 shares of Cooper Tire 10/14/20 $14,700 Purchased 100 shares of Procter & Gamble 7/10/20 $7,700 Purchased 350 shares of Cooper Tire 11/1/20 $14,000 Purchased 350 shares of PepsiCo 5/14/20 $32,000 Purchased 300 shares of Kellogg 10/14/20 $21,000 Relevant tax basis/holding period information related to sales of securities in the current year: Purchased 2,000 shares of Microsoft on 5/1/20 for $21,000 Purchased 200 shares of Apple, Inc. on 3/8/18 for $90,000 Purchased 300 shares of Cooper Tire on 1/12/17 for $9,000 In order for Joseph and Diana to maintain their full-time jobs, they send David to a child care program after school five days a week. During the year, they paid the day care operator $12,250 for Davids care. The Cohens personal residence was burglarized on October 1. The Cohens had the following personal-use property stolen: Item Purchase Date Fair Value on Date of Theft Tax Basis of Item Insurance Reimbursement Received Laptop computer 09/01/2020 3,000 3,000 500 Rifle 03/01/2018 4,000 4,500 500 TV/Projector 03/01/2018 5,000 13,000 1,000 2007 Honda Pilot 07/01/2019 8,000 10,500 500 Total 14,000 25,000 2,500

Part 1: Tax return preparation (35 points) You have been engaged to prepare the 2020 federal income tax return for Joseph and Diana Cohen. Your tax form submission should include, as applicable: Form 1040, Schedules 1, 4, A, B, C, D, E, SE and Forms 4684 and 8949. You will come across many items on the tax return we have not talked about in class; if we have not covered it in class, and it is not included in the information below, you do not need to address it on this assignment. Your solution should contain a detailed Excel workpaper that calculates the tax due or refunded with the return and calculated in the form of the tax formula (see Ch. 4 lecture slides). The calculation should be well labeled and EASY to follow. This presentation will be factored into your grade. Do NOT include any references or citations on your workpaper. . O You must complete a typed return using 2020 forms found on Canvas. Use the following assumptions in preparing the return: Use all opportunities under law to minimize the 2020 federal income tax. o If required information is missing, use reasonable assumptions to fill in the gaps. Use whole dollars when preparing the tax return. Do not prepare a state income tax return. o Ignore alternative minimum tax. o O Part 2: Client memo (5 points) Complete a letter to the client regarding tax planning advice. Identify and explain two reasonable tax planning items the family could use to minimize their tax liability and/or maximize their wealth. All items would be implemented in future years and do not impact the current tax return. This memo should not exceed one single-spaced page. O 1 JOSEPH AND DIANA COHEN INDIVIDUAL FEDERAL INCOME TAX RETURN Joseph (age 52) and Diana (age 54) Cohen are married and live in Pleasantville, New Jersey. Joseph is the Vice-President of Sales at a small start-up company. Diana is a former advertising executive who currently consults with former clients. The Cohens have three children Rebecca (age 18), Alan (age 15), and David (age 12). In January, Rebecca left home to attend a liberal arts college. The Cohens pay for Rebecca's tuition and room in board while she takes classes full time; she is not currently employed. The Cohens provided the following information: Joseph's social security number is 598-94-2583 Diana's social security number is 301-52-2942 Rebecca's social security number is 887-44-8710 Alan's social security number is 810-42-9092 David's social security number is 855-11-3021 The Cohen's mailing address is 85 North Maple Drive, Pleasantville, New Jersey 08232 . . Joseph Cohen reported the following the following information relating to his employment during the year: Employer Gross Wages Federal Income Tax Withholding $35,230 State Income Tax Withholding $8,900 Alternative Energy $148,325 The above amounts do not reflect any income items described below. Joseph's employer withheld all payroll taxes it was required to withhold. The entire Cohen family was covered by minimum essential health insurance during each month in 2020. The insurance, valued at $16,000, was provided by Joseph's employer, Alternative Energy. Diana Cohen received the following self-employment income during the year (she uses the cash method of accounting). Consulting revenue reported to her on a Form 1099-MISC, Box 7 High-end Retail $32,000 Jensen's Health Products $8,500 Strategic Solutions $3,750 In this self-employment endeavor, Diana is an active participant and the activities qualify as trade or businesses for the Qualified Business Income Deduction. Unfortunately, Diana did not keep records of any of her business expenses for the year. The Cohens also received the following during the year: Interest income from First Bank of New Jersey Interest income from Patterson, New Jersey School District Interest income from U.S. Treasury Bond Interest income from General Mills corporate bond $320 $200 $350 $400 $50,000 $1,500 $750 $200 $425 $140 Interest income from the State of Maine's Tourism Support Private Activity Bond Qualified dividend income from Rio Tinto Qualified dividend income from Microsoft Qualified dividend income from Cooper Tire Qualified dividend income from Cardinal Health Qualified dividend income from Union Pacific Qualified dividend income from Procter & Gamble Qualified dividend income from PepsiCo Qualified dividend income from Kellogg Qualified dividend income from Abbott Labs Qualified dividend income from 3M Life insurance payment - Mutual life (mother's passing) Cash gift from her father New Jersey state income tax refund* $190 $225 $200 $275 $350 $150,000 $5,000 $325 Refund was from state tax they paid in 2019. They deducted all of their state taxes as itemized deductions in 2019. Total itemized deductions were $32,000, $3,000 of which were state taxes. Diana received the following payments as a result of a lawsuit she filed for damages sustained in a car accident: Medical Expenses for physical injuries $16,500 Emotional Distress (from having been physically injured) $7,300 Punitive Damages $30,000 Total $53,800 Eight years ago, Joseph purchased an annuity contract for $88,000. He received his first annuity payment on January 1, 2020. The annuity will pay Joseph $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Joseph on Form 1099-R for the current year. On January 3, 2020, the Cohens sold their prior principal residence. They purchased that residence in 2011 and had lived there full-time until they sold it this year. They originally purchased the home for $310,000. The Cohen family has never claimed any tax depreciation (nor were they allowed to) on the home. The sales price of the home was $825,000. The home is located at 45 East Entrada Trail, Lexington New Jersey 40502. The Cohens took two trips to Atlantic City. While on the first trip they lost $2800 gambling, but on the second trip they won $2600. The Cohens did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year. The Cohens made the following payments during 2020: Dentist (unreimbursed by insurance) Doctors (unreimbursed by insurance) Prescriptions (unreimbursed by insurance) Real property taxes on residence $1,500 $475 $255 $4,200 Vehicle registration fee (based on age of the vehicle) Mortgage interest on principle residence Contribution to the American Lung Association Contribution to the Habitat for Humanity Contribution to Methodist Church of NJ Contribution to Senator Rick Hartley's Re-election Campaign $175 $7,845 $2,300 $1,200 $3,000 $2,500 During the year, Joseph paid $16,600 in alimony and child support payments to a former spouse, Natalie (SSN #568-72-8787), whom he divorced in 2014. When his daughter Wendy (SSN #568-72-666), who lives with her mother full-time, reaches the age of 18 the payments will drop to $5,600. The Cohens had the following activity in their brokerage account during the year (all transactions were reported on a Form 1099-B and basis information for each stock sale was reported to the IRS): Sold 2,000 shares of Microsoft Sold 75 shares of Apple, Inc. Sold 300 shares of Cooper Tire Purchased 100 shares of Procter & Gamble Purchased 350 shares of Cooper Tire Purchased 350 shares of PepsiCo Purchased 300 shares of Kellogg 7/1/20 4/15/20 10/14/20 7/10/20 11/1/20 5/14/20 10/14/20 $22,500 $28,750 $14,700 $7,700 $14,000 $32,000 $21,000 Relevant tax basis/holding period information related to sales of securities in the current year: Purchased 2,000 shares of Microsoft on 5/1/20 for $21,000 Purchased 200 shares of Apple, Inc. on 3/8/18 for $90,000 Purchased 300 shares of Cooper Tire on 1/12/17 for $9,000 In order for Joseph and Diana to maintain their full-time jobs, they send David to a child care program after school five days a week. During the year, they paid the day care operator $12,250 for David's care. The Cohens' personal residence was burglarized on October 1. The Cohens had the following personal- use property stolen: Item Purchase Date Tax Basis of Item Fair Value on Date of Theft Laptop computer Rifle TV/Projector 2007 Honda Pilot Total 09/01/2020 03/01/2018 03/01/2018 07/01/2019 3,000 4,000 5,000 8,000 14,000 3,000 4,500 13,000 10,500 25,000 Insurance Reimbursement Received 500 500 1,000 500 2,500 Part 1: Tax return preparation (35 points) You have been engaged to prepare the 2020 federal income tax return for Joseph and Diana Cohen. Your tax form submission should include, as applicable: Form 1040, Schedules 1, 4, A, B, C, D, E, SE and Forms 4684 and 8949. You will come across many items on the tax return we have not talked about in class; if we have not covered it in class, and it is not included in the information below, you do not need to address it on this assignment. Your solution should contain a detailed Excel workpaper that calculates the tax due or refunded with the return and calculated in the form of the tax formula (see Ch. 4 lecture slides). The calculation should be well labeled and EASY to follow. This presentation will be factored into your grade. Do NOT include any references or citations on your workpaper. . O You must complete a typed return using 2020 forms found on Canvas. Use the following assumptions in preparing the return: Use all opportunities under law to minimize the 2020 federal income tax. o If required information is missing, use reasonable assumptions to fill in the gaps. Use whole dollars when preparing the tax return. Do not prepare a state income tax return. o Ignore alternative minimum tax. o O Part 2: Client memo (5 points) Complete a letter to the client regarding tax planning advice. Identify and explain two reasonable tax planning items the family could use to minimize their tax liability and/or maximize their wealth. All items would be implemented in future years and do not impact the current tax return. This memo should not exceed one single-spaced page. O 1 JOSEPH AND DIANA COHEN INDIVIDUAL FEDERAL INCOME TAX RETURN Joseph (age 52) and Diana (age 54) Cohen are married and live in Pleasantville, New Jersey. Joseph is the Vice-President of Sales at a small start-up company. Diana is a former advertising executive who currently consults with former clients. The Cohens have three children Rebecca (age 18), Alan (age 15), and David (age 12). In January, Rebecca left home to attend a liberal arts college. The Cohens pay for Rebecca's tuition and room in board while she takes classes full time; she is not currently employed. The Cohens provided the following information: Joseph's social security number is 598-94-2583 Diana's social security number is 301-52-2942 Rebecca's social security number is 887-44-8710 Alan's social security number is 810-42-9092 David's social security number is 855-11-3021 The Cohen's mailing address is 85 North Maple Drive, Pleasantville, New Jersey 08232 . . Joseph Cohen reported the following the following information relating to his employment during the year: Employer Gross Wages Federal Income Tax Withholding $35,230 State Income Tax Withholding $8,900 Alternative Energy $148,325 The above amounts do not reflect any income items described below. Joseph's employer withheld all payroll taxes it was required to withhold. The entire Cohen family was covered by minimum essential health insurance during each month in 2020. The insurance, valued at $16,000, was provided by Joseph's employer, Alternative Energy. Diana Cohen received the following self-employment income during the year (she uses the cash method of accounting). Consulting revenue reported to her on a Form 1099-MISC, Box 7 High-end Retail $32,000 Jensen's Health Products $8,500 Strategic Solutions $3,750 In this self-employment endeavor, Diana is an active participant and the activities qualify as trade or businesses for the Qualified Business Income Deduction. Unfortunately, Diana did not keep records of any of her business expenses for the year. The Cohens also received the following during the year: Interest income from First Bank of New Jersey Interest income from Patterson, New Jersey School District Interest income from U.S. Treasury Bond Interest income from General Mills corporate bond $320 $200 $350 $400 $50,000 $1,500 $750 $200 $425 $140 Interest income from the State of Maine's Tourism Support Private Activity Bond Qualified dividend income from Rio Tinto Qualified dividend income from Microsoft Qualified dividend income from Cooper Tire Qualified dividend income from Cardinal Health Qualified dividend income from Union Pacific Qualified dividend income from Procter & Gamble Qualified dividend income from PepsiCo Qualified dividend income from Kellogg Qualified dividend income from Abbott Labs Qualified dividend income from 3M Life insurance payment - Mutual life (mother's passing) Cash gift from her father New Jersey state income tax refund* $190 $225 $200 $275 $350 $150,000 $5,000 $325 Refund was from state tax they paid in 2019. They deducted all of their state taxes as itemized deductions in 2019. Total itemized deductions were $32,000, $3,000 of which were state taxes. Diana received the following payments as a result of a lawsuit she filed for damages sustained in a car accident: Medical Expenses for physical injuries $16,500 Emotional Distress (from having been physically injured) $7,300 Punitive Damages $30,000 Total $53,800 Eight years ago, Joseph purchased an annuity contract for $88,000. He received his first annuity payment on January 1, 2020. The annuity will pay Joseph $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Joseph on Form 1099-R for the current year. On January 3, 2020, the Cohens sold their prior principal residence. They purchased that residence in 2011 and had lived there full-time until they sold it this year. They originally purchased the home for $310,000. The Cohen family has never claimed any tax depreciation (nor were they allowed to) on the home. The sales price of the home was $825,000. The home is located at 45 East Entrada Trail, Lexington New Jersey 40502. The Cohens took two trips to Atlantic City. While on the first trip they lost $2800 gambling, but on the second trip they won $2600. The Cohens did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year. The Cohens made the following payments during 2020: Dentist (unreimbursed by insurance) Doctors (unreimbursed by insurance) Prescriptions (unreimbursed by insurance) Real property taxes on residence $1,500 $475 $255 $4,200 Vehicle registration fee (based on age of the vehicle) Mortgage interest on principle residence Contribution to the American Lung Association Contribution to the Habitat for Humanity Contribution to Methodist Church of NJ Contribution to Senator Rick Hartley's Re-election Campaign $175 $7,845 $2,300 $1,200 $3,000 $2,500 During the year, Joseph paid $16,600 in alimony and child support payments to a former spouse, Natalie (SSN #568-72-8787), whom he divorced in 2014. When his daughter Wendy (SSN #568-72-666), who lives with her mother full-time, reaches the age of 18 the payments will drop to $5,600. The Cohens had the following activity in their brokerage account during the year (all transactions were reported on a Form 1099-B and basis information for each stock sale was reported to the IRS): Sold 2,000 shares of Microsoft Sold 75 shares of Apple, Inc. Sold 300 shares of Cooper Tire Purchased 100 shares of Procter & Gamble Purchased 350 shares of Cooper Tire Purchased 350 shares of PepsiCo Purchased 300 shares of Kellogg 7/1/20 4/15/20 10/14/20 7/10/20 11/1/20 5/14/20 10/14/20 $22,500 $28,750 $14,700 $7,700 $14,000 $32,000 $21,000 Relevant tax basis/holding period information related to sales of securities in the current year: Purchased 2,000 shares of Microsoft on 5/1/20 for $21,000 Purchased 200 shares of Apple, Inc. on 3/8/18 for $90,000 Purchased 300 shares of Cooper Tire on 1/12/17 for $9,000 In order for Joseph and Diana to maintain their full-time jobs, they send David to a child care program after school five days a week. During the year, they paid the day care operator $12,250 for David's care. The Cohens' personal residence was burglarized on October 1. The Cohens had the following personal- use property stolen: Item Purchase Date Tax Basis of Item Fair Value on Date of Theft Laptop computer Rifle TV/Projector 2007 Honda Pilot Total 09/01/2020 03/01/2018 03/01/2018 07/01/2019 3,000 4,000 5,000 8,000 14,000 3,000 4,500 13,000 10,500 25,000 Insurance Reimbursement Received 500 500 1,000 500 2,500