*Need help on Qualified dividends on FORM 1040*
Gregory and Lulu Clifden's Tax Return Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Gregory R. and Lulu B. Clifden live with their family at the Rock Glen House Bed & Breakfast, which Gregory operates. The Bed & Breakfast (B&B) is located at 33333 Fume Blanc Way, Temecula, CA 92591. Gregory (born May 4, 1976) and Lulu (born June 12, 1977) enjoy good health and eyesight. 1. The Clifdens have three sons. Gerald was born April 16, 2002, Gary was born December 2, 2007, and Glenn was born January 13, 2009. All three boys live at home and the Clifdens provide more than 50% of their support. 2. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: Room rental income $137,896 2,100 Vending machine income Advertising expense 4,810 Depreciation for book and tax purposes Mortgage interest on the B&B 18,100 22,987 17,540 Wages of cleaning people Taxes and licenses Supplies consumed Business insurance Laundry expenses 6,420 18,870 6,300 4,289 1,850 2,400 6,350 Accounting fees Office expenses Utilities All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 3. The Clifdens made estimated federal income tax payments of $2,000 and estimated state income tax payments of $6,000 (all made during 2019). 4. Lulu worked about 1,000 hours as a substitute schoolteacher with the local school district. She also spent $276 out-of-pocket for various supplies for her classroom. Lulu's Form W-2 from the school district is located on a separate tab. 5. Gregory is retired from the U.S. Navy. His annual statement from the Navy, Form 1099-R. 6. Gregory and Lulu paid (and can substantiate) the following amounts during the year: Mastercard interest $1,480 5,457 Dental expenses (orthodontics for Gary) California state income tax (for 2018) Charitable contributions 2,130 Deductible interest on home (personal portion) 4,875 9,631 3,830 845 Real estate taxes (personal portion) Life insurance premiums Automobile registration fees (deductible portion) 45 Tax return preparation fee 475 Contributions to Donald Trump's re-election campaign 1,000 7. During the year, Gregory and Lulu received the following qualifying dividends and interest: Interest: Bob's Big Bank $381 Bank of Ireland 271 City of Temecula Tax Exempt Bonds 1,490 See 1099-INT Vintage Bank Qualified dividends: Southwest Airlines Heinz Foods $250 550 Also, Lulu owns Series EE U.S. savings bonds. During the year, the bond redemption value increased by $1,300. Lulu has not elected the accrual method for these bonds. There were no Irish taxes paid on the interest from the Bank of Ireland. All the above stocks, bonds, and bank accounts are community property. 8. Lulu has a stock portfolio. During the year she sold stock, for which she received 1099-B Forms, as follows (basis was provided to the IRS in all cases): Orange Co. Gold Co. Sales price $8,114 See Form 1099-B Basis 3,803 Green Co. $1,449 2,578 10/31/14 10/23/19 Date acquired 02/11/19 Date sold 06/19/19 9. Lulu paid her ex-husband $4,800 alimony in the current year, as required under the 2002 divorce decree. Her ex-husband's name is Hector Leach and his Social Security number is 566-23-5431. 10. Gregory does all the significant work in the Bed & Breakfast and therefore he pays self-employment tax on 100 percent of the earnings from the B&B. 11. During the year, Gregory's uncle Martin died. Martin had a $50,000 life insurance policy that named Gregory as the beneficiary. Gregory received the check for the benefits payable under the policy on November 30 of the current year. Martin also left Gregory a parcel of land with an appraised value of $120,000. 12. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. 13. Lulu was not eligible for health care benefits due to the part-time nature of her job thus health insurance for the Clifden household was purchased by Gregory. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2019. Assume that the self-employed health insurance deduction is $1,424. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Required: Gregory and Lulu have come to you to prepare their 2019 federal income tax return. You are not required to complete the state income tax return. Do not file a federal Form 4952. . Click here to access the tax table for this problem. The taxpayers do not want to make a contribution to the presidential election campaign. Enter all amounts as positive numbers, except for a "loss." If required, enter a "loss" as a negative number on the tax form. If an amount box does not require an entry or the answer is zero, enter "0". If required, round your answers to the nearest dollar. On Schedule SE, use the rounded amounts in subsequent computations. Remember, the taxpayers make the election to include any child's interest and dividends on their tax return. Make realistic assumptions about any missing data (addresses, etc.) that you may need. The following is a list of the 13 forms and schedules that you will need to complete the tax return: Part 1 Part 2 Part 3 Part 4 Form 1040 Schedule C Schedule E Form 8962 Schedule 1 Schedule D Form 8812 Form 8995 Schedule 2 Schedule SE Child Tax Credit Worksheet Schedule 3 Form 8949 Schedule A Qualified Dividends and Capital Gain Tax Worksheet Schedule B Instructions Comprehensive Problem 2 - Part 2: Schedule C, Schedule D, Schedule SE, Form 8949, and Qualified Dividends and Capital Gain Tax Worksheet. Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Enter all amounts as positive numbers, except for a "loss". If required, enter a "loss" as a negative number on the tax form. If an amount box does not require an entry or the answer is zero, enter "0". On Form SE, use rounded amounts in subsequent computations. Information regarding (1) the business which Gregory operates and (2) Lulu's stock transactions are presented below. 1. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: $137,896 2,100 Room rental income Vending machine income Advertising expense Depreciation for book and tax purposes Mortgage interest on the B&B 4,810 18,100 22,987 Wages of cleaning people 17,540 Taxes and licenses 6,420 Supplies consumed 18,870 6,300 Business insurance Laundry expenses 4,289 Accounting fees Office expenses 1,850 2,400 6,350 Utilities All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 2. Lulu has a stock portfolio. During the year she sold the following stock, for which she received 1099-B Forms, as follows: Orange Co. Green Co. Gold Co. See Form Sales price $8,114 $1,449 Basis 3,803 1099-B Date acquired 02/11/19 2,578 10/31/14 10/23/19 Date sold 06/19/19 Instructions Comprehensive Problem 2 - Part 3: Child Tax Credit Worksheet, Schedule 8812, and Schedule E Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Follow the specific rounding instructions provided at the beginning of each form or schedule. If an amount box does not require an entry or the answer is zero, enter "0". Enter all amounts as positive numbers unless instructed otherwise. Information regarding the Clifdens children is reproduced below: The Clifdens have three sons. Gerald is 17 years old, Gary is 12 years old, and Glenn is 10 years old. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. Instructions Comprehensive Problem 2 - Part 4: Form 8962, Form 8995 Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Follow the specific rounding instructions provided at the beginning of each form or schedule. If an amount box does not require an entry or the answer is zero, enter "0". Enter all amounts as positive numbers unless instructed otherwise. Information regarding these forms has been reproduced below: Lulu was not eligible for health care benefits due to the part-time nature of her job, thus health insurance for the Clifden household was purchased by Gregory. The Clifdens are not eligible for an exemption from coverage. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2019. Assume that the self-employed health insurance deduction is $1,424. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Table for Federal Poverty Line Persons in Family/Household 2019 FPL for 48 States and DC $12,140 16,460 20,780 25,100 29,420 33,740 38,060 42,380 Each additional person + 4,320 The household income is then expressed as a percentage of the FPL. Table for Repayment of the Credit Amount Taxpayers Other Than Single Single Less than 200% $300 $600 At least 200% but less than 300% 800 1,600 At least 300% but less than 400% 1,325 2,650 At least 400% No limit No limit Click here to access the 2019 Applicable Figure Table. Glenn Clifden 475-23-1426 Son Yes No 1 Wages, salaries, tips, etc. Attach Form(s) W-2 ...... 1 13,700 2a b 2a Tax-exempt interest .. 1,490 Taxable interest. Attach Sch. B if required 800 x Standard Deduction for- Single or Married filing separately, $12,200 Married filing jointly or Qualifying widow(er), $24,400 Head of household, $18,350 If you checked any box under Standard Deduction, see instructions. b Ordinary dividends. Attach 3a Qualified dividends ... 3a 800 x Sch. B if required 4a IRA distributions ...... b Taxable amount.. c Pensions and annuities 4C d Taxable amount .... 5a Social security benefits 5a b Taxable amount ....... 6 Capital gain or (loss). Attach Schedule D if required. If not required, check here ... 7a Other income from Schedule 1, line 9....... b Add lines 1, 2b, 3b, 4b, 40, 56, 6, and 7a. This is your total income .. 8a Adjustments to income from Schedule 1, line 22 ......... b Subtract line 8a from line 7b. This is your adjusted gross income... 9 Standard deduction or itemized deductions (from Schedule A) .... 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A. 11a Add lines 9 and 10 ............... b Taxable income. Subtract line 11a from line 8b ..... 11a 11b For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2019) Form 1040 (2019) Gregory R. & Lulu B. Clifden 543-88-9756 Page 2 8814 12a Tax (see inst.) Check if any from Form(s): 1 2 4972 30 b Add Schedule 2, line 3, and line 12a and enter the total .... 13a Child tax credit or credit for other dependents ....... Gregory and Lulu Clifden's Tax Return Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Gregory R. and Lulu B. Clifden live with their family at the Rock Glen House Bed & Breakfast, which Gregory operates. The Bed & Breakfast (B&B) is located at 33333 Fume Blanc Way, Temecula, CA 92591. Gregory (born May 4, 1976) and Lulu (born June 12, 1977) enjoy good health and eyesight. 1. The Clifdens have three sons. Gerald was born April 16, 2002, Gary was born December 2, 2007, and Glenn was born January 13, 2009. All three boys live at home and the Clifdens provide more than 50% of their support. 2. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: Room rental income $137,896 2,100 Vending machine income Advertising expense 4,810 Depreciation for book and tax purposes Mortgage interest on the B&B 18,100 22,987 17,540 Wages of cleaning people Taxes and licenses Supplies consumed Business insurance Laundry expenses 6,420 18,870 6,300 4,289 1,850 2,400 6,350 Accounting fees Office expenses Utilities All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 3. The Clifdens made estimated federal income tax payments of $2,000 and estimated state income tax payments of $6,000 (all made during 2019). 4. Lulu worked about 1,000 hours as a substitute schoolteacher with the local school district. She also spent $276 out-of-pocket for various supplies for her classroom. Lulu's Form W-2 from the school district is located on a separate tab. 5. Gregory is retired from the U.S. Navy. His annual statement from the Navy, Form 1099-R. 6. Gregory and Lulu paid (and can substantiate) the following amounts during the year: Mastercard interest $1,480 5,457 Dental expenses (orthodontics for Gary) California state income tax (for 2018) Charitable contributions 2,130 Deductible interest on home (personal portion) 4,875 9,631 3,830 845 Real estate taxes (personal portion) Life insurance premiums Automobile registration fees (deductible portion) 45 Tax return preparation fee 475 Contributions to Donald Trump's re-election campaign 1,000 7. During the year, Gregory and Lulu received the following qualifying dividends and interest: Interest: Bob's Big Bank $381 Bank of Ireland 271 City of Temecula Tax Exempt Bonds 1,490 See 1099-INT Vintage Bank Qualified dividends: Southwest Airlines Heinz Foods $250 550 Also, Lulu owns Series EE U.S. savings bonds. During the year, the bond redemption value increased by $1,300. Lulu has not elected the accrual method for these bonds. There were no Irish taxes paid on the interest from the Bank of Ireland. All the above stocks, bonds, and bank accounts are community property. 8. Lulu has a stock portfolio. During the year she sold stock, for which she received 1099-B Forms, as follows (basis was provided to the IRS in all cases): Orange Co. Gold Co. Sales price $8,114 See Form 1099-B Basis 3,803 Green Co. $1,449 2,578 10/31/14 10/23/19 Date acquired 02/11/19 Date sold 06/19/19 9. Lulu paid her ex-husband $4,800 alimony in the current year, as required under the 2002 divorce decree. Her ex-husband's name is Hector Leach and his Social Security number is 566-23-5431. 10. Gregory does all the significant work in the Bed & Breakfast and therefore he pays self-employment tax on 100 percent of the earnings from the B&B. 11. During the year, Gregory's uncle Martin died. Martin had a $50,000 life insurance policy that named Gregory as the beneficiary. Gregory received the check for the benefits payable under the policy on November 30 of the current year. Martin also left Gregory a parcel of land with an appraised value of $120,000. 12. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. 13. Lulu was not eligible for health care benefits due to the part-time nature of her job thus health insurance for the Clifden household was purchased by Gregory. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2019. Assume that the self-employed health insurance deduction is $1,424. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Required: Gregory and Lulu have come to you to prepare their 2019 federal income tax return. You are not required to complete the state income tax return. Do not file a federal Form 4952. . Click here to access the tax table for this problem. The taxpayers do not want to make a contribution to the presidential election campaign. Enter all amounts as positive numbers, except for a "loss." If required, enter a "loss" as a negative number on the tax form. If an amount box does not require an entry or the answer is zero, enter "0". If required, round your answers to the nearest dollar. On Schedule SE, use the rounded amounts in subsequent computations. Remember, the taxpayers make the election to include any child's interest and dividends on their tax return. Make realistic assumptions about any missing data (addresses, etc.) that you may need. The following is a list of the 13 forms and schedules that you will need to complete the tax return: Part 1 Part 2 Part 3 Part 4 Form 1040 Schedule C Schedule E Form 8962 Schedule 1 Schedule D Form 8812 Form 8995 Schedule 2 Schedule SE Child Tax Credit Worksheet Schedule 3 Form 8949 Schedule A Qualified Dividends and Capital Gain Tax Worksheet Schedule B Instructions Comprehensive Problem 2 - Part 2: Schedule C, Schedule D, Schedule SE, Form 8949, and Qualified Dividends and Capital Gain Tax Worksheet. Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Enter all amounts as positive numbers, except for a "loss". If required, enter a "loss" as a negative number on the tax form. If an amount box does not require an entry or the answer is zero, enter "0". On Form SE, use rounded amounts in subsequent computations. Information regarding (1) the business which Gregory operates and (2) Lulu's stock transactions are presented below. 1. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: $137,896 2,100 Room rental income Vending machine income Advertising expense Depreciation for book and tax purposes Mortgage interest on the B&B 4,810 18,100 22,987 Wages of cleaning people 17,540 Taxes and licenses 6,420 Supplies consumed 18,870 6,300 Business insurance Laundry expenses 4,289 Accounting fees Office expenses 1,850 2,400 6,350 Utilities All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 2. Lulu has a stock portfolio. During the year she sold the following stock, for which she received 1099-B Forms, as follows: Orange Co. Green Co. Gold Co. See Form Sales price $8,114 $1,449 Basis 3,803 1099-B Date acquired 02/11/19 2,578 10/31/14 10/23/19 Date sold 06/19/19 Instructions Comprehensive Problem 2 - Part 3: Child Tax Credit Worksheet, Schedule 8812, and Schedule E Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Follow the specific rounding instructions provided at the beginning of each form or schedule. If an amount box does not require an entry or the answer is zero, enter "0". Enter all amounts as positive numbers unless instructed otherwise. Information regarding the Clifdens children is reproduced below: The Clifdens have three sons. Gerald is 17 years old, Gary is 12 years old, and Glenn is 10 years old. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. Instructions Comprehensive Problem 2 - Part 4: Form 8962, Form 8995 Note: This problem is divided into four parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. Follow the specific rounding instructions provided at the beginning of each form or schedule. If an amount box does not require an entry or the answer is zero, enter "0". Enter all amounts as positive numbers unless instructed otherwise. Information regarding these forms has been reproduced below: Lulu was not eligible for health care benefits due to the part-time nature of her job, thus health insurance for the Clifden household was purchased by Gregory. The Clifdens are not eligible for an exemption from coverage. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2019. Assume that the self-employed health insurance deduction is $1,424. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Table for Federal Poverty Line Persons in Family/Household 2019 FPL for 48 States and DC $12,140 16,460 20,780 25,100 29,420 33,740 38,060 42,380 Each additional person + 4,320 The household income is then expressed as a percentage of the FPL. Table for Repayment of the Credit Amount Taxpayers Other Than Single Single Less than 200% $300 $600 At least 200% but less than 300% 800 1,600 At least 300% but less than 400% 1,325 2,650 At least 400% No limit No limit Click here to access the 2019 Applicable Figure Table. Glenn Clifden 475-23-1426 Son Yes No 1 Wages, salaries, tips, etc. Attach Form(s) W-2 ...... 1 13,700 2a b 2a Tax-exempt interest .. 1,490 Taxable interest. Attach Sch. B if required 800 x Standard Deduction for- Single or Married filing separately, $12,200 Married filing jointly or Qualifying widow(er), $24,400 Head of household, $18,350 If you checked any box under Standard Deduction, see instructions. b Ordinary dividends. Attach 3a Qualified dividends ... 3a 800 x Sch. B if required 4a IRA distributions ...... b Taxable amount.. c Pensions and annuities 4C d Taxable amount .... 5a Social security benefits 5a b Taxable amount ....... 6 Capital gain or (loss). Attach Schedule D if required. If not required, check here ... 7a Other income from Schedule 1, line 9....... b Add lines 1, 2b, 3b, 4b, 40, 56, 6, and 7a. This is your total income .. 8a Adjustments to income from Schedule 1, line 22 ......... b Subtract line 8a from line 7b. This is your adjusted gross income... 9 Standard deduction or itemized deductions (from Schedule A) .... 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A. 11a Add lines 9 and 10 ............... b Taxable income. Subtract line 11a from line 8b ..... 11a 11b For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2019) Form 1040 (2019) Gregory R. & Lulu B. Clifden 543-88-9756 Page 2 8814 12a Tax (see inst.) Check if any from Form(s): 1 2 4972 30 b Add Schedule 2, line 3, and line 12a and enter the total .... 13a Child tax credit or credit for other dependents
