Question

Use the following information to complete Paige Turners 2023 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps. Please note that the software may only have the 2022 forms available, which will be accepted for this assignment.

Your deliverable should be FEDERAL Form 1040 and any associated schedules, as applicable, in PDF format. You DO NOT need to prepare any state or local/city tax returns for this project.

1. Paige Turner is single and has two children from her previous marriage. Ali lives with Paige, and Paige provides more than half of her support. Leif lives with his father, Will (Leif lived with Will for all of 2023). Will provides more than half of Leifs support. Paige pays alimony of $425 per month to Will. The payments are to continue until Leif reaches age 18, when they will be reduced to $175. Paige provides you with the following additional information:

She uses the cash method of accounting and a calendar year for reporting.

She wishes to contribute to the presidential election campaign.

Paige lives at 523 Essex Street, Bangor, Maine (04401).

Paiges birthday is May 31, 1974.

Alis birthday is October 5, 2010.

Leifs birthday is December 1, 2007.

Paiges Social Security number is 007-16-4727.

Alis Social Security number is 005-61-7232.

Leifs Social Security number is 004-23-3419.

Wills Social Security number is 006-45-6333.

She does not have any foreign bank accounts or trusts.

2. Paige is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). Her annual salary is $73,000. ASCI has an extensive fringe benefits program for its employees. Paiges pay stubs indicate that she had $7,550 withheld in federal taxes, $5,010 in state taxes, and $4,510 in Social Security taxes, and $1,062 in Medicare taxes. Her taxable compensation includes the following:

Salary (before subtracting her 401(k) and flexible spending plan contributions).

$73,000

-- Personal contribution to 401k account

(7000)

-- Flexible spending plan contributions

(3600)

+ Group term life insurance

100

+ Whole life insurance

310

+ Payment of educational costs

See a below

+ Free parking

See b below

+ Health club dues

900

+ Disability pay (see #7 below)

1,200

Paige furnishes you with the following description of the fringe benefits she received from ASCI in 2023.

a. Taking advantage of ASCIs educational assistance program, during the fall Paige enrolled in two graduate engineering classes at a local college. ASCI paid her tuition, fees, and other course-related costs of $2,300.

b. Paige received free parking in the companys security garage that would normally cost $200 per month.

3. Paige manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year 2023, Paige was awarded the Employee Safety Award on December 15, 2023. The cash award was $550.

4. On January 15, 2023, Paiges father died. From her fathers estate, she received stock valued at $32,000 (his basis was $14,000) and her fathers house valued at $93,000 (his basis in the house was $58,000).

5. Paige owns several other investments and in February 2023 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2023. (See Exhibit A.)

EXHIBIT A Forms 1099 and 1098

This is important tax information and is being furnished to the Internal Revenue Service.

1099-Div Dividends & Distributions

Entity

Description

Amount

General Dynamics

Gross qualified dividends

$300

1099-Int Interest

Entity

Description

Amount

New Jersey Economic Development Bonds

Gross Interest

$300

IBM bonds

Gross Interest

700

State of Nebraska Bonds

Gross Interest

200

1098-Mortgage Interest Statement

Entity

Description

Amount

Sunbelt Credit Union

Mortgage Interest

$7,100

Northeast Bank

Home equity loan interest

435

Grubstake Mining & development:

Preliminary report (preliminary K-1) to Paige for the 2023 tax year

Distribution to shareholder

$1000

Ordinary Income (1% of $200,000)

$2000

6. In addition to the investments discussed above, Paige owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding (S corp. ID number 45-4567890). Grubstake reported taxable income of $200,000 and paid a distribution of $1.00 per share during the current year. Paige tells you that Grubstake typically does not send out its K-1 reports until late April. However, its preliminary report has been consistent with the K- 1 for many years. (See Exhibit A.) Paige does not materially participate in Grubstakes activities.

7. Paige slipped on a wet spot in front of a computer store last July. She broke her ankle and was unable to work for two weeks. She incurred $1,350 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,200 for pain and suffering resulting from the injury. ASCI continued to pay her salary during the two weeks she missed because of the accident. ASCIs plan also paid her $1,200 in disability pay for the time she was unable to work. Under this plan ASCI pays the premiums for the disability insurance.

8. Paige received a Form 1099-B from her broker for the sale of the following securities during 2023

Security

Sale Date

Purchase Date

Sales Price

Commission Paid on Sales

Her Basis

Nebraska Bonds

04/14/2023

10/22/2023

$2,300

$160

$1,890

Cassill Corp (500 Shares)

10/20/2023

02/19/2023

$8,500

$425

$9,760

9. In addition to the taxes withheld from her salary, she also made timely estimated federal tax payments of $200 per quarter and timely estimated state income tax payments of $175 for the first three quarters. The $175 fourth quarter state payment was made on December 28, 2023. Paige would like to receive a refund for any overpayment.

10. Because of her busy work schedule, Paige was unable to provide her accountant with the tax documents necessary for filing her 2019 state and federal income tax returns by the due date (April 15, 2023). In filing her extension on April 15, 2023, she made a federal tax payment of $750. Her return was eventually filed on June 25, 2023. In August 2023, she received a federal refund of $180 and a state tax refund of $60. Her itemized deductions for 2019 were $12,500.

11. Paige found a renter for her fathers house on August 1, 2023. The monthly rent is $450, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months rent and a $450 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On August 1, 2023, Paige received $1,350 from the tenant per the terms of the lease agreement. In November 2023, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December 2023, he reduced his rental payment to $100 to compensate for the plumbing repairs. Paige provides you with the following additional information for the rental in 2023.

Property taxes

$770

Other maintenance expenses

285

Insurance Expense

495

Management fee

350

Depreciation (to be computed)

?

The rental property is located at 35 Harvest Street, Orono, Maine 04473. Local practice is to allocate 12 percent of the fair market value of the property to the land. (See #4.) Paige makes all decisions with respect to the property.

12. Paige paid $2,050 in real estate taxes on her principal residence. The real estate tax is used to pay for town schools and other municipal services.

13. Paige drives a 2023 Acura TL. Her car registration fee (based on the car year) is $50 and covers the period 1/1/21 through 12/31/21. In addition, she paid $280 in property tax to the state based on the book value of the car.

14. In addition to the medical costs presented in #7, Paige incurred the following unreimbursed medical costs:

Dentist

$ 315

Doctor

370

Prescription drugs

240

Over-the-counter drugs

145

Optometrist

125

Emergency room charges

483

LASIK eye surgery

2,000

Chiropractor

275

15. On March 1, 2023, Paige took advantage of low interest rates and refinanced her $78,000 home mortgage with her original lender. The new home loan is for 15 years. She paid $215 in closing costs and $1,500 in discount points (prepaid interest) to obtain the loan. The house is worth $155,000, and Paiges basis in the house is $90,000. As part of the refinancing arrangement, she also obtained a $10,000 home-equity loan. She used the proceeds from the home-equity loan to reduce the balance due on her credit cards. Paige received several Form 1098 statements from her bank for interest paid by her in 2023. Details appear below. (See also Exhibit A)

Primary home mortgage

$7,100

Home equity loan

435

Credit cards

498

Car loan

390

16. On May 14, 2023, Paige contributed clothing to the Salvation Army. The original cost of the clothing was $740. She has substantiation valuing the donation at $360. The Salvation Army is located at 350 Stone Ridge Road, Bangor, Maine 04401. In addition, she made the following cash contributions and received a statement from each of the following organizations acknowledging her contribution:

Larkin College

$850

Unity Way

125

First Methodist Church

790

Amos House (homeless shelter)

200

Local Chamber of Commerce

100

17. On April 1, 2023, Paiges house was robbed. She apparently interrupted the burglar because all that is missing is an antique brooch she inherited from her grandmother (June 12, 2009) and $300 in cash. Unfortunately, she did not have a separate rider on her insurance policy covering the jewelry. Therefore, the insurance company reimbursed her only $500 for the brooch. Her basis in the brooch was $6,000, and its fair market value was $7,500. Her insurance policy also limits to $100 the amount of cash that can be claimed in a theft.

18. Paige sells real estate in the evening and on weekends. She runs her business from a rental office she shares with several other realtors (692 River Road Bangor, Maine 04401). The name of her business is Turner Real Estate and the Federal identification number is 05-8799561. Her business code is 531210. Paige has been operating in a business-like way since 2005 and has always shown a profit. She had the following income and expenses from her business:

Commissions earned

$21,250

Expenses:

Advertising

2,200

Telephone

95

Real estate license

130

Rent

6,000

Utilities

600

She has used her Toyota Camry in her business since June 1, 2020. During 2023, she properly documented 6,000 business miles (500 miles each month). The total mileage on her car (i.e., business and personal-use miles) during the year was 15,000 miles (including 200 miles commuting to and from the real estate office). In 2023, Paige elects to use the standard mileage method to calculate her car expenses. She spent $45 on tolls and $135 on parking related to the real estate business.

19. Paiges company has an accountable expense reimbursement plan for employees from which Paige receives $12,200 for the following expenses:

Airfare

$4,750

Hotel

3,500

Meals

2,020

Car rentals

610

Entertainment

915

Incidentals

405

20. During 2023, Paige also paid $300 for business publications other than those paid for by her employer and $325 for a local CPA to prepare her 2020 tax return.