prepare a tax return for the Scott's.

Individual Income Tax Case Study-Fall 2021 Adam and Bree Scott, both under age 50, are married filing a joint tax return for tax year 2020. They have three children, Cash (age 14). Luke (age 13), and Hazel (age 2). All of the children live with them and qualify as dependents. Adam's salary in 2020 was $67,475, from which $11,118 of Federal income tax was withheld. Bree earned income from her job of $35,600 and had $3,978 of Federal income tax withheld. The appropriate amount of FICA tax was withheld for both Adarn and Bree. Since they live in Texas, they are not required to pay a state income tax. Their zip code is 79602 (Taylor County). They have met the Minimal Essential Coverage (MEC) for their family, so there are not any Affordable Care impacts on their tax return. a Adam made alimony payments of $3600 during 2020 to his former wife, Janet, as required in the divorce decree dated 2003. He also made child support payments of $9,895 for his sixteen-year-old daughter Presley. Presley lives with Janet and is claimed by her as a dependent Bree received interest from her savings accounts at First Federal Bank of $639 and from American National Bank of $325. Adam and Bree both made contributions to a qualified traditional IRA of $6,000 each for 2020. Neither Adam nor Bree is covered by a retirement plan at work. Adam won a raffle sponsored by the American Heart Association. As the winner, he had the choice of a motorcycle or cash of $15,999. He reluctantly decided to accept the cash since Bree does not think riding a motorcycle around their children is setting a good example In order for Bree to work, she must hire someone to look after Hazel. She pays Ashley Nix $3,720 per year for childcare. Adam and Bree vacationed in Europe during the summer of 2020. While they were overseas, they rented out their 3,800 square foot luxury home for thirteen days to some friends who were attending a conference in the area. They received $2,650 in compensation. Their friends truly appreciated this since all the hotels in the area were booked. The family collectively incurred out-of-pocket medical and dental expense of $8,974. Real estate taxes on the Scott's primary residence amounted to $7,595, and they paid mortgage interest of $16,010. Their original mortgage was taken out in 2016 and had a balance of $700,000 at that time. Adam and Bree made contributions to their local church, First Baptist Church, of $10,308. In addition, they paid a CPA $580 to prepare their tax return for 2019 during March of 2020. The Scott's county was flooded during the year and declared a federal disaster area. The had multiple losses due to the flood, which is unusual for this geographic region. They chose not to file an amended return in regard to these losses. Information regarding these losses follows: FMV Before the loss Asset Adj. Basis FMV After the loss Insurance Recovery Vehicle 1 Vehicle 2 Boat $24,000 $33,000 $12,500 $38,000 $26,000 $18,000 $17,000 $ 7,000 $ -O- $ 9,500 so $7,000 a Adam is still paying off his student loans. He paid qualified student loan interest of $3,915 in 2020. Bree is currently taking evening courses at the local university for continuing education. She has received a scholarship of $7,000 for the Fall 2020 semester which can be applied towards her tuition and fees only. Her total bill for this semester before considering her scholarship was $7,800, which included $800 for textbooks. Adam and Bree also contributed $4500 to each of their children's 529 Qualified Tuition Plans in 2020. The Scott's sold some investments during 2020. Information pertinent to those investments was reported to them on Form 1099-B as follows: Asset Adi. Basis Sales Price Date Purchased Date Sold ABC Stock XYZ Stock $12,000 $18,500 $26,000 $ 3,000 10/16/2004 12/15/2005 3/11/2020 1/15/2020 In addition to his regular job, Adam does some consulting on the side. Gross revenues from his business amounted to $24,629. He also incurred some expenses, including supplies of $1,578, rent on office and equipment of $4,170, and utilities of $2,872. In addition, Adam drove a total of 3,380 business miles evenly throughout the year and chose to take the standard mileage rate in lieu of actual automobile expenses. Adam has receipts and a mileage log to back up his deductions. He does not claim the home office deduction Bree's father passed away during 2020. She was the sole beneficiary of his life insurance policy worth $30,000,000. Individual Income Tax Case Study-Fall 2021 Adam and Bree Scott, both under age 50, are married filing a joint tax return for tax year 2020. They have three children, Cash (age 14). Luke (age 13), and Hazel (age 2). All of the children live with them and qualify as dependents. Adam's salary in 2020 was $67,475, from which $11,118 of Federal income tax was withheld. Bree earned income from her job of $35,600 and had $3,978 of Federal income tax withheld. The appropriate amount of FICA tax was withheld for both Adarn and Bree. Since they live in Texas, they are not required to pay a state income tax. Their zip code is 79602 (Taylor County). They have met the Minimal Essential Coverage (MEC) for their family, so there are not any Affordable Care impacts on their tax return. a Adam made alimony payments of $3600 during 2020 to his former wife, Janet, as required in the divorce decree dated 2003. He also made child support payments of $9,895 for his sixteen-year-old daughter Presley. Presley lives with Janet and is claimed by her as a dependent Bree received interest from her savings accounts at First Federal Bank of $639 and from American National Bank of $325. Adam and Bree both made contributions to a qualified traditional IRA of $6,000 each for 2020. Neither Adam nor Bree is covered by a retirement plan at work. Adam won a raffle sponsored by the American Heart Association. As the winner, he had the choice of a motorcycle or cash of $15,999. He reluctantly decided to accept the cash since Bree does not think riding a motorcycle around their children is setting a good example In order for Bree to work, she must hire someone to look after Hazel. She pays Ashley Nix $3,720 per year for childcare. Adam and Bree vacationed in Europe during the summer of 2020. While they were overseas, they rented out their 3,800 square foot luxury home for thirteen days to some friends who were attending a conference in the area. They received $2,650 in compensation. Their friends truly appreciated this since all the hotels in the area were booked. The family collectively incurred out-of-pocket medical and dental expense of $8,974. Real estate taxes on the Scott's primary residence amounted to $7,595, and they paid mortgage interest of $16,010. Their original mortgage was taken out in 2016 and had a balance of $700,000 at that time. Adam and Bree made contributions to their local church, First Baptist Church, of $10,308. In addition, they paid a CPA $580 to prepare their tax return for 2019 during March of 2020. The Scott's county was flooded during the year and declared a federal disaster area. The had multiple losses due to the flood, which is unusual for this geographic region. They chose not to file an amended return in regard to these losses. Information regarding these losses follows: FMV Before the loss Asset Adj. Basis FMV After the loss Insurance Recovery Vehicle 1 Vehicle 2 Boat $24,000 $33,000 $12,500 $38,000 $26,000 $18,000 $17,000 $ 7,000 $ -O- $ 9,500 so $7,000 a Adam is still paying off his student loans. He paid qualified student loan interest of $3,915 in 2020. Bree is currently taking evening courses at the local university for continuing education. She has received a scholarship of $7,000 for the Fall 2020 semester which can be applied towards her tuition and fees only. Her total bill for this semester before considering her scholarship was $7,800, which included $800 for textbooks. Adam and Bree also contributed $4500 to each of their children's 529 Qualified Tuition Plans in 2020. The Scott's sold some investments during 2020. Information pertinent to those investments was reported to them on Form 1099-B as follows: Asset Adi. Basis Sales Price Date Purchased Date Sold ABC Stock XYZ Stock $12,000 $18,500 $26,000 $ 3,000 10/16/2004 12/15/2005 3/11/2020 1/15/2020 In addition to his regular job, Adam does some consulting on the side. Gross revenues from his business amounted to $24,629. He also incurred some expenses, including supplies of $1,578, rent on office and equipment of $4,170, and utilities of $2,872. In addition, Adam drove a total of 3,380 business miles evenly throughout the year and chose to take the standard mileage rate in lieu of actual automobile expenses. Adam has receipts and a mileage log to back up his deductions. He does not claim the home office deduction Bree's father passed away during 2020. She was the sole beneficiary of his life insurance policy worth $30,000,000