Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, and Wanda owns her own business (an S-Corp). They file a joint return. Personal items: Wages / Salaries $100,000 (Includes both Lance and Wanda) Interest Income 1,030 Child support payments to John Allen 9,000 Alimony payments to John Allen 20,000 Lottery winnings 870 Federal income tax withholding 10,000 State income tax withheld 5,000 Wanda was previously married to John Allen, they divorced several years ago (prior to 2018). Under the divorce decree, Wanda was obligated to pay alimony and child support to John. She paid him $20,000 in alimony and $9,000 in child support, which agreed with the divorce decree. Wanda is the owner of her own business. Throughout the year she earned $25,000 of ordinary income from this business (taxed as an S-Corp), reported on a K-1. Additionally, Lance and Wanda had: (1) Sale of LMN publicly traded stock on 2/15/2022 for $5,000 (originally purchased for $10,000 on 8/15/2021) (2) Sale of QRS publicly traded stock on 10/15/2022 for $19,000 (originally purchased for $9,800 on 12/15/2020) (3) Sale of a boat on 5/15/2022 for $10,000 used for personal recreation (originally purchased for $20,000 on 6/15/2017) (4) Wanda inherited publicly traded stock worth $30,000 from a deceased uncle on September 30, 2022 (5) Immediately after receiving this stock, Wanda sold it for $30,000. This stock was originally purchased by his uncle on January 15th , 2019, for $23,000

Prepare the 2022 Federal income tax return for Lance and Wanda Dean. This is a group assignment. It is required that you submit both the (1) tax return and a (2) brief explanation for line items on the return. Questions/Explanations 1) Show an explanation (including the calculation) of the Net Capital Gain/Loss a. It is required that you break down each transaction using the formula Sales Proceeds Cost Basis = Gain/Loss b. Id also recommend some explanation. That is, a few brief comments about items that are relevant. c. It is required that you mention each of the 5 additional items from page 1. 2) An explanation of how you came up with the amount for form 1040 line 12 3) Show an explanation for the calculation of tax (form 1040 line 16) a. It is required that you break this down into a formula. Please submit the following forms 4 items: (1) Cover page with your name and section #, (2) 1040, (3) Schedule 1, and (4) a written explanation answering the three questions above. Make sure the explanations match the numbers on the actual forms, if they do not, I will deduct points. Normally, this tax return would require additional forms including schedule D, E, and form 8995. I do not want these additional forms prepared; I only want the forms listed above. Hints: 1) Gambling winnings are reported on Schedule 1, line 8b. 2) The income from Wandas business will be reported on Schedule 1 line 5. 3) Net Capital gains/losses are reported on form 1040 line 7. No Sch D is required. 4) The taxpayer has a refund. There should be something on line 34 Form 1040. 5) Assume the taxpayers have adequate health insurance (i.e. ignore any health insurance items on the returns). 6) You must decide whether the taxpayer should take the standard deduction or itemize. Be familiar with what deductions are For AGI and From AGI (e.g., student loan interest is an above the line deduction). 7) Do not forget the Qualified Business Income Deduction, line 13 form 1040. Assume Wanda qualifies for this deduction. In Chapter 15, we can discuss the rules in more detail. Assume that the QBID is a deduction equal to 20% of Qualified Business Income (QBI). With QBI being equal to Schedule 1 line 5. 8) S corps are not subject to Self-Employment Tax. 9) Dont forget to check the box for filing status (Single, MFJ, HOH, or MFS). 10) We are not preparing state income or inheritance tax returns.