Scenario 3: Sophia Woodruff Directions This scenario does not require you to prepare a tax return. Refer to the interview notes here and the brokerage statement on the next page for the information needed to answer the questions that follow. Interview Notes Sophia is 20 years old, unmarried, and graduated from junior college in December In 2021, she worked as a care provider for her disabled sister, Savannah, and received $15,200 in Medicaid walver payments reported on Form W-2 Box 1. In June, Sophia sold some stock she inherited. She provided the brokerage state- ment showing all her stock sales for 2021 Sophia is a U.S. citizen, has a Social Security number, and lived with Savannah in the U.S. all year. Sophia provides all of her own support. 2021 Tax Reporting Statement Sophia Woodruff 890 Alma Avenue Your City, YS ZIP Account No. 1111-2222 Recipient ID 655-00-XXood ABC INVESTMENTS 1456 Pima Plaza Your City, YS ZIP Payer's Fed ID: 25-800x60 Long-Term Transactions for Which Basis is Reported to the IRS, Report on Form 8949, Part II, with Box D checked. Description of Property Box 18CUSIP/SYMBOL Activity Type Quantity Sold Date Acquired Date Sold or Boxta (Box 10) Disposed Box 1) Loss Not Allowed Based on Amount in Box Box71 Proceeds Box 1d) Cost or Other Gross Proceeds Basis Reported to the IRS (Box 10) BAG Uhausted Accu MarWash Sale Loss Federal Income Gainos Discount Disallowed To Whed Box 11 Box 1) (Box) 0.00 300.00 Sale 300.00 200.00 500.00 Wash Sale Example Company 6564352007 WASHX 10.000000 3/17/2020 12/28/2021 Long Term Gain Example Company 7564352007 LONGX Sale 25000000 73/2012 776772021 Sale 40.000000 2/11/2012 12/31/2021 Subtotal 65.000000 77000 700 2,000.00 3,200.00 70000 1.600.00 2,800.00 300.00 400.00 400.00 000 0.00 0.00 0.00 300.00 Long-Term Transactions for Which Basis was not Reported to the IRS, Roport on Form 8949, Part II, with Box E checked, Description of Property (Box 107CUSIP/SYMBOL Activity Type Quartly Sold Date Acquired Date Sold or (Box 1) (Box 10) Disposed (Boxtel Proceeds (Box 10 Gross Proceeds Reported to the IRS (Box) Cootor Other Basis Box 1) Unadjusted conued Marwah Sale Loss Federal Income LOS Not Ganitos Discount Disslowed Tax Wetheld Alowed Based (Box 10 (Box (Box 4) on Amount in Box 1d (Box7 Inherited Example Company 556435200 / INHER Sale 20.000000 6/26/2021 8/1/2021 Subtotal 20.000000 Totals 8,400.00 8,400.00 11,600.00 5,000.00 5,000.00 7,800.00 3,400.00 3,400.00 3,800.00 0.00 0.00 0.00 300.00 000 0.00 0.00 Scenario 3: Test Questions 7. Sophia's inherited stock sale is treated as a long-term transaction a. True b. False income is too high is too high 8. What is Sophia's total capital gain or loss? 9. Which of the following are true? a. Sophia is not eligible for the Earned Income Credit because her investment b. Sophia is not eligible for the Earned Income Credit because her earned income C. Sophia is not eligible for the Earned Income Credit because she is too young to claim the credit without a qualifying child. d. Sophia is eligible for the Earned Income Credit. 10. Sophia may exclude the qualified Medicaid waiver payments from gross income and include those payments in earned income. a. True b. False