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Comprehensive Problem 6-59 (LO 6-1, LO 6-2, LO 6-3)

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Read the following letter and help Shady Slim with his tax situation. Please assume that his gross income is $172,900 (which consists only of salary) for purposes of this problem.

December 31, 2020

To the friendly student tax preparer:

Hi, its Shady Slim again. I just got back from my 55th birthday party, and Im told that you need some more information from me in order to complete my tax return. Im an open book! Ill tell you whatever I think you need to know.

Let me tell you a few more things about my life. As you may recall, I am divorced from my wife, Alice. I know that it's unusual, but I have custody of my son, Shady Jr. The judge owed me a few favors and I really love the kid. He lives with me full time and my wife gets him every other weekend. I pay the vast majority of my son's expenses. I think Alice should have to pay some child support, but she doesn't have to pay a dime. The judge didn't owe me that much, I guess.

I had to move this year after getting my job at Roca Cola. We moved on February 3 of this year, and I worked my job at Roca Cola for the rest of the year. I still live in the same state, but I moved 500 miles away from my old house. I hired a moving company to move our stuff at a cost of $2,300, and I drove Junior in my car. Junior and I got a hotel room along the way that cost us $65 (I love Super 8!).

Can you believe Im still paying off my student loans, even after 15 years? I paid a total of $900 in interest on my old student loans this year.

Remember when I told you about that guy that hit me with his car? I had a bunch of medical expenses that were not reimbursed by the lawsuit or by my insurance. I incurred a total of $20,000 in medical expenses, and I was only reimbursed for $11,000. Good thing I can write off medical expenses, right?

I contributed a lot of money to charity this year (and have receipt documentation for all contributions). Im such a nice guy! I gave $1,000 in cash to the March of Dimes. I contributed some of my old furniture to the church. It was some good stuff! I contributed a red velvet couch and my old recliner. The furniture is considered vintage and is worth $5,000 today (the appraiser surprised me!), even though I only paid $1,000 for it back in the day. When I contributed the furniture, the pastor said he didnt like the fabric and was going to sell the furniture to pay for some more pews in the church. Oh well, some people just have no taste, right? Roca Cola had a charity drive for the United Way this year and I contributed $90. Turns out, I dont even miss it because Roca Cola takes it right off my paycheck every month . . . $15 a month starting in July. My pay stub verifies that I contributed the $90 to the United Way. Oh, one other bit of charity from me this year. An old buddy of mine was down on his luck. He lost his job and his house. I gave him $500 to help him out.

I paid a lot of money in interest this year. I paid a total of $950 in personal credit card interest. I also paid $18,000 in interest on my $500,000 home mortgage that helped me buy my dream home. I also paid $2,000 in real estate taxes for my new house.

A few other things I want to tell you about this year. Someone broke into my house and stole my kid's brand new bicycle and my set of golf clubs. The total loss from theft was $900. I paid $125 in union dues this year. I had to pay $1,200 for new suits for my job. Roca Cola requires its managers to wear suits every day on the job. I spent a total of $1,300 to pay for gas to commute to my job this year.

Oh, this is pretty cool. I've always wanted to be a firefighter. I spent $1,400 in tuition to go to the local firefighter's school. I did this because someone told me that I can deduct the tuition as an itemized deduction, so the money would be coming back to me.

That should be all the information you need right now. Please calculate my taxable income and complete page 1 of Form 1040 (through taxable income, line 11b) and Schedule A. You're still doing this for free, right?

Comprehensive Problem 6-59 Part b

b. Complete pages 1 of Form 1040 (through taxable income, line 10) and Schedule A.

Shady Slims address is 19010 N.W. 135th Street, Miami, FL 33054.

Social security numbers:

Shady Slim: 123-45-6789 Shady Slim,Jr: 222-22-2222

(Round your intermediate computations to the nearest whole dollar amount. Input all the values as positive numbers. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement. Use 2020 tax rules regardless of year on form)

Were bom before January 2, 1955 Are blind (2) Social Security number Age/Blindness You: : Dependents (see instructions) (1) First name Shady Spouse: Was born before January 2, 1955 Is blind (3) Relationship to you (4) if qualifies for (see instructions): Child tax credit Credit for other dependents Last name (Enter as XXX-XX-XXXX) Slim, Jr. 222-22-2222 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 172,900 2a Tax-exempt interest 2a 2b 3a Qualified dividends 3a b Taxable interest. Attach Sch. Bif required b Ordinary dividends. Attach Sch. Bif required b b Taxable amount 3b 4a IRA distributions 4a 4b c Pensions and annuities 4c d Taxable amount 4d 5a Social security benefits 5a b Taxable amount 5b 6 Capital gain or loss). Attach Schedule D if required. If not required, check here 6 7a Other income from Schedule 1, line 9 7 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. 7b 172,900 b Add lines 1, 2b, 3b, 4b, 40, 5b, 6, and 7a. This is your total income , 6 Ba Adjustments to income from Schedule 1, line 22 b b Subtract line Ba from line 7b. This is your adjusted gross income 8a 8b 172,900 9 Standard deduction or itemized deductions (from Schedule A) 9 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A 10 11a Add lines 9 and 10 11a 0 172,900 b Taxable income. Subtract line 11a from line 8b 11b Paid 8 instructions and cneck TNIS DOX a Home mortgage interest and points reported to you on Form 1098. See instructions if limited b Home mortgage interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address Caution: Your mortgage interest deduction may be limited (see instruction). 8b 8c c Points not reported to you on Form 1098. See instructions for special rules d Reserved 8d 8e 0 e Add lines 8a through 8c 9 Investment interest. Attach Form 4952 if required. See Instructions 9 10 0 10 Add lines 8e and 9 Gifts to 11 Gifts by cash or check. If you made any gift of $250 or more, see 11 instructions Charity 12 Other than by cash or check. If you made any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 12 Caution: If you made a gift and got a benefit 13 Carryover from prior year 13 for it, see instructions, 14 Add lines 11 through 13 Casualty and 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Theft Losses Attach Form 4684 and enter the amount from line 18 of that form. See instructions 14 0 15 16 Other-from list in instructions. List type and amount Other Itemized Deductions 16 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Form 1040 or 1040-SR, line 9 17 0 Total Itemized Daductions 18 If you elect to itemize deductions even though they are less than your standard