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Mr. and Mrs. Blue are married and file a joint tax return. The following information is available concerning the preparation of their 2020 tax return: 1. 2. 3. She began receiving payments during 2020 from a purchased annuity that has matured. Under the annuity contract she is to receive $15,000 per year for the rest of her life. Her life expectancy is 14 years. She purchased the annuity for $63,000. He was the beneficiary on a $400,000 life insurance policy on his mother who died during 2020. He opted to receive the proceeds in a lump sum during 2020. They received 150 shares of common stock of the Black Company as a dividend on their 900 shares of common stock of the Black Company on March 1, 2020. On March 1, 2020 the common stock of the Black Company had a market value of $49 per share. They originally paid $37,800 for the 900 shares of the Black Company when they were purchased on January 1, 2013. He owns a whole-life insurance policy that has not matured. The insurance company declared a $45 dividend on his policy. He elected to leave the dividend with the insurance company to increase the value of the policy. He has made total premium payments of $9,300 over the life of the policy. He was divorced from his ex-wife during 2017. Under the divorce decree he is to pay his ex-wife $3,500 per month in alimony and $3,000 per month in child support. They redeemed Series EE savings bonds with a cost of $13,000 for $29,000. They paid the following costs for their dependent son to attend college: tuition of $26,100 and room and board of $1,450. Their adjusted gross income is $128,050. 4. 5. 6. Required: 1. Determine the tax treatment of the above-mentioned items on Mr. and Mrs. Blue's 2020 tax return. 2. Determine the basis of the Black Company common stock and the holding period on December 31, 2020 of the 150 shares of common stock of the Black Company received as a stock dividend. Determine the basis of the whole-life insurance policy. Assuming that Mrs. Blue received her 15th annuity payment during 2034, determine the tax treatment of the annuity payment on Mr. and Mrs. Blue's 2034 tax return. 3. 4 : Mr. and Mrs. Blue are married and file a joint tax return. The following information is available concerning the preparation of their 2020 tax return: 1. 2. 3. She began receiving payments during 2020 from a purchased annuity that has matured. Under the annuity contract she is to receive $15,000 per year for the rest of her life. Her life expectancy is 14 years. She purchased the annuity for $63,000. He was the beneficiary on a $400,000 life insurance policy on his mother who died during 2020. He opted to receive the proceeds in a lump sum during 2020. They received 150 shares of common stock of the Black Company as a dividend on their 900 shares of common stock of the Black Company on March 1, 2020. On March 1, 2020 the common stock of the Black Company had a market value of $49 per share. They originally paid $37,800 for the 900 shares of the Black Company when they were purchased on January 1, 2013. He owns a whole-life insurance policy that has not matured. The insurance company declared a $45 dividend on his policy. He elected to leave the dividend with the insurance company to increase the value of the policy. He has made total premium payments of $9,300 over the life of the policy. He was divorced from his ex-wife during 2017. Under the divorce decree he is to pay his ex-wife $3,500 per month in alimony and $3,000 per month in child support. They redeemed Series EE savings bonds with a cost of $13,000 for $29,000. They paid the following costs for their dependent son to attend college: tuition of $26,100 and room and board of $1,450. Their adjusted gross income is $128,050. 4. 5. 6. Required: 1. Determine the tax treatment of the above-mentioned items on Mr. and Mrs. Blue's 2020 tax return. 2. Determine the basis of the Black Company common stock and the holding period on December 31, 2020 of the 150 shares of common stock of the Black Company received as a stock dividend. Determine the basis of the whole-life insurance policy. Assuming that Mrs. Blue received her 15th annuity payment during 2034, determine the tax treatment of the annuity payment on Mr. and Mrs. Blue's 2034 tax return. 3. 4
