Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2012. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a local law firm. During 2014, he reported the following receipts.

Salary Interest income

Money market account at Omni Bank Savings account at Bosne State Bank City of Springfield general purpose bonds

Inheritance from Daniel Life insurance proceeds Amount from sale of St. Louis lot Proceeds from estate sale Federal income tax refund (for 2013 tax overpayment)

$ 80,000 1,100

4,400 60,000 200,000 80,000 9,000 700

Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2014. Logan also was the designated beneficiary of an insurance policy on Daniels life with a maturity value of $200,000. The lot in St. Louis was pur- chased on May 2, 2009, for $85,000 and held as an investment. As the neigh- borhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2014, for $80,000. The estate sale consisted largely of items belong- ing to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.

Logans other 2014 expenditures include the following.

Medical expenses (including $10,500 for dental services) Taxes

State of Missouri income tax (includes withholdings)

Property taxes on personal residence Interest on home mortgage Contribution to church (paid pledges for 2014 and 2015)

$3,200 4,500

$11,500

7,700 4,600 4,800

$ 300 3,000

Logan and his dependents were covered by his employers health insurance pol- icy for all of 2014. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helens implants. Helen is Logans wid- owed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 5, 2014, upon the advice of his pastor, he prepaid his pledge for 2015.

Logans household, all of whom he supports, includes the following.

Logan Taylor (age 48) Helen Taylor (age 70) Asher Taylor (age 23) Mia Taylor (age 22)

Social Security Number

123-45-6787 123-45-6780 123-45-6783 123-45-6784

Birth Date

08/30/1966 01/13/1944 07/18/1991 02/16/1992

Helen, Logans mother, receives a modest Social Security benefit. Asher, a son, is a full-time student in dental school and earns $4,500 as a part-time dental assistant. Mia, a daughter, does not work and is engaged to be married.

Part 1Tax Computation

Using the appropriate forms and schedules, compute Logans 2014 Federal income tax. Federal income tax of $5,500 was withheld from his wages. If Logan has any overpayment on his income tax, he wants the refund sent to him. Assume that the proper amounts of Social Security and Medicare taxes were withheld. Logan does not want to contribute to the Presidential Election Campaign Fund. Suggested soft- ware: H&R BLOCK Tax Software.

Part 2Follow-Up Advice

In early 2015, the following events take place.

Helen decides that she wants to live with one of her daughters and moves to Arizona.

Asher graduates from dental school and joins an existing practice in St. Louis.

Mia marries, and she and her husband move in with his parents.

Using the insurance proceeds he received on Daniels death, Logan pays off the

mortgage on his personal residence.

Logan believes that these events may have an effect on his tax position for 2015. Therefore, he requests your advice.

Write a letter to Logan explaining in general terms how the 2015 events will affect his Federal income tax liability. Assume that Logans salary and other factors not mentioned (e.g., property and state income taxes) will remain the same. Use the Tax Rate Schedules in projecting Logans tax for 2015.