Tax Project

Required:

Use the following information to complete Paige Turners 2017 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps.

Any required forms, schedules, and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms.

Facts:

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 (Lief lived with Will for all of 2017). Will provides more than half of Leifs support. Paige pays alimony of $400 per month to Will. The payments are to continue until Leif reaches age 18, when they will be reduced to $150. 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, 1978.

Alis birthday is October 5, 2008.

Leifs birthday is December 1, 2006.

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.

Paige is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). ASCIs federal employer identification number is 79-1234466. Paiges pay stubs indicate that she had $7,230 withheld in federal taxes, $4,987 in state taxes, $4,495 in Social Security taxes, and $1,051 in Medicare taxes. ASCI has an extensive fringe benefits program for its employees.

Paige earned salary of $70,000 (before subtracting her 401(k) and flexible spending plan contributions). She contributed $7,000 to her 401(k) account, and she contributed $2,500 to her flexible spending account.

ASCI paid $397 of whole life insurance premiums to cover Paiges personal whole life insurance policy. ASCI also paid health club dues of $900 to a nearby health club on Paiges behalf.

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.

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

Paige manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year, Paige was awarded the Employee Safety Award on December 15. The cash award was $500.

On January 15, 2017, Paiges father died. From her fathers estate, she received stock valued at $30,000 (his basis was $12,000) and her fathers house valued at $90,000 (his basis in the house was $55,000).

Paige owns several other investments and in February 2017 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2017. (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	2,000
State of Nebraska bonds	Gross interest	700

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 2017 tax year

Distribution to shareholder	$1,000
Ordinary income (1% of $200,000)	$2,000

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.

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 $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,000 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 as a taxable fringe benefit.

Paige received a Form 1099-B from her broker for the sale of the following securities during 2016. The adjusted basis amounts were reported to the IRS.

Security	Sales Date	Purchase Date	Sales Price	Commission Paid on Sale	Her Basis
Nebraska state bonds	03/14/17	10/22/11	$2,300	$160	$1,890
Cassill Corp (500 shares)	10/20/17	02/19/16	8,500	425	9,760

In addition to the taxes withheld from her salary, she also made timely estimated federal tax payments of $175 per quarter and timely estimated state income tax payments of $150 for the first three quarters. The $150 fourth-quarter state payment was made on December 28, 2017. Paige would like to receive a refund for any overpayment.

Because of her busy work schedule, Paige was unable to provide her accountant with the tax documents necessary for filing her 2016 state and federal income tax returns by the due date (April 15, 2017). In filing her extension on April 15, 2017, she made a federal tax payment of $750. Her return was eventually filed on June 25, 2017. In August 2017, she received a federal refund of $180 and a state tax refund of $60. Her itemized deductions for 2016 were $12,480.

Paige found a renter for her fathers house on August 1. The monthly rent is $400, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months rent and a $400 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, Paige received $1,200 from the tenant per the terms of the lease agreement. In November, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December, 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 2017.

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 #8.) Paige makes all decisions with respect to the property.

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.

Paige drives a 2015 Acura TL. Her car registration fee (based on the car year; hint: not an ad valorem tax) is $50 and covers the period 1/1/17 through 12/31/17. In addition, she paid $280 in property tax to the state based on the book value of the car (hint: ad valorem). (Hint: car is used partially for work)

In addition to the medical costs presented in #11, Paige incurred the following unreimbursed medical costs:

Dentist	$ 310
Doctor	390
Prescription drugs	215
Over-the-counter drugs	140
Optometrist	125
Emergency room charges	440
LASIK eye surgery	2,000
Chiropractor	265

On March 1, Paige took advantage of low interest rates and refinanced her $75,000 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 2017. Details appear below. (See also Exhibit A ).

Primary home mortgage	$7,100
Home-equity loan	435
Credit cards	498
Car loan on Acura	390

On May 14, 2017, 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: (hint: not all are qualified)

Larkin College	$850
United Way	125
First Methodist Church	790
Amos House (homeless shelter)	200
Local Chamber of Commerce	100

On April 1, 2017, Paiges house was robbed. She apparently interrupted the burglar because all thats missing is an antique brooch she inherited from her grandmother (June 12, 2009) and $300 in cash. Unfortunately, she didnt 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.

Paige sells real estate in the evening and on weekends (considered an active trade or business). 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 2006 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 Acura TL in her business since July 1, 2017. During 2017, she properly documented 6,000 business miles (1,000 miles each month). The total mileage on her car (i.e., for both business and personal use) during the year was 15,000 miles (including 200 miles commuting to and from the real estate office). In 2017, 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.

Paiges company has an accountable expense reimbursement plan for employees from which Paige receives $12,000 for the following expenses:

Airfare	$4,700
Hotel	3,400
Meals	2,000
Car rentals	600
Entertainment	900
Incidentals	400

During 2017, Paige also paid $295 for business publications other than those paid for by her employer and $325 for a local CPA to prepare her 2016 tax return.

Paige has qualifying insurance for purposes of the Affordable Care Act (ACA).

PLEASE FILL OUT THE ABOVE FORM USING THE INFORMATION PROVIDED

U.S. Individual Income Tax Return OMB No. 1545-0074 | IAS Use Only-Do not write or tale in this space 2017,endig For the year Jan. 1-Dec. 31,2017, or other tax year beginning Your first name and initial See separate instructions Your social security number 20 Last name If a joint retum, spouse's first name and initial Home address inumber and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions) Last name Spouse's social security number Make sure the SSN(s) above and on line 6c are comect. Presidential Election Campaign Chack here you, a yor spouse itfiing jointly, want $3 to go to this fund. Checking Foreign country name Foreign postal code a bax below will not change your tax or Filing Status Single Check only one 3Married filing separately. Enter spouse's SSN above Exemptions Head of househald (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's name here. 2 Married filing jointly (even if only one had income) and full n 5 Qualifying widowter) (see instructions) 6a Yourself. If someone can clain you as a dependent, do not check box 6a on 8a and 6b No. of children on 6c who: (3) Dependents 4) if chid under ace 17 relationshpto uqualifying for child tax credit (2) Depcrdent's lived with you e did not live with you due to divorce ) First name Last name sae Instructions If more than four dependents, see instructions and check here (see instructions) not entered above Add numbers on lines above d 7 8a Total number of exemptions claimed wages, salaries, tips, etc. Attach Form(s) W-2 Taxable interest. Attach Schedule B if required Income . . . 8a . . . b Tax-exempt interest. Do not include on line 8a.. 8b 9a Ordinary dividends. Attach Schedule B if required.... 9a W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. b Qualified dividends 10 Taxable refunds, credits, or offsets of state and local income taxes . . . . . . 10 11 Ali 12 Business income or (loss). Attach Schedule C or C-EZ 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 14 Other gains or (losses). Attach Form 4797. . .14 15a IRA distributions 16a Pensions and annuities 16a 17 Hental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E17 mony received If you did not get a W-2 b Taxable amount b Taxable amount... com b Taxable amount.. . 20b 20a Social security benefits 20a 21 Other income. List type and amount 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income 23 Educator expenses 24 Certain business expenses of reservists, performing artists, and Adjusted Gross Income fee-basis govemment officials. Attach Form 2106 or 2106-EZ 25 Health savings account deduction. Attach Form 888925 26 Moving expenses. Attach Form 3903 . 27 Deductible part of self-employment tax. Attach Schedule SE27 28 Self-employed SEP, SIMPLE, and qualified plans.. 28 29 Self-employed health insurance deduction. . . 30 Penalty on early withdrawal of savings. 30 31a Alimony paid b Recipient's SSN 26 29 33 Student loan interest deduction. 34 Reserved for future use .. . ..34 35 Domestic production activities deduction. Attach Form 8903 35 36 Add lines 23 through 35 37 Subtract line 36 from line 22. This is your adjusted gross income -36 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 2017) U.S. Individual Income Tax Return OMB No. 1545-0074 | IAS Use Only-Do not write or tale in this space 2017,endig For the year Jan. 1-Dec. 31,2017, or other tax year beginning Your first name and initial See separate instructions Your social security number 20 Last name If a joint retum, spouse's first name and initial Home address inumber and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions) Last name Spouse's social security number Make sure the SSN(s) above and on line 6c are comect. Presidential Election Campaign Chack here you, a yor spouse itfiing jointly, want $3 to go to this fund. Checking Foreign country name Foreign postal code a bax below will not change your tax or Filing Status Single Check only one 3Married filing separately. Enter spouse's SSN above Exemptions Head of househald (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's name here. 2 Married filing jointly (even if only one had income) and full n 5 Qualifying widowter) (see instructions) 6a Yourself. If someone can clain you as a dependent, do not check box 6a on 8a and 6b No. of children on 6c who: (3) Dependents 4) if chid under ace 17 relationshpto uqualifying for child tax credit (2) Depcrdent's lived with you e did not live with you due to divorce ) First name Last name sae Instructions If more than four dependents, see instructions and check here (see instructions) not entered above Add numbers on lines above d 7 8a Total number of exemptions claimed wages, salaries, tips, etc. Attach Form(s) W-2 Taxable interest. Attach Schedule B if required Income . . . 8a . . . b Tax-exempt interest. Do not include on line 8a.. 8b 9a Ordinary dividends. Attach Schedule B if required.... 9a W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. b Qualified dividends 10 Taxable refunds, credits, or offsets of state and local income taxes . . . . . . 10 11 Ali 12 Business income or (loss). Attach Schedule C or C-EZ 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 14 Other gains or (losses). Attach Form 4797. . .14 15a IRA distributions 16a Pensions and annuities 16a 17 Hental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E17 mony received If you did not get a W-2 b Taxable amount b Taxable amount... com b Taxable amount.. . 20b 20a Social security benefits 20a 21 Other income. List type and amount 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income 23 Educator expenses 24 Certain business expenses of reservists, performing artists, and Adjusted Gross Income fee-basis govemment officials. Attach Form 2106 or 2106-EZ 25 Health savings account deduction. Attach Form 888925 26 Moving expenses. Attach Form 3903 . 27 Deductible part of self-employment tax. Attach Schedule SE27 28 Self-employed SEP, SIMPLE, and qualified plans.. 28 29 Self-employed health insurance deduction. . . 30 Penalty on early withdrawal of savings. 30 31a Alimony paid b Recipient's SSN 26 29 33 Student loan interest deduction. 34 Reserved for future use .. . ..34 35 Domestic production activities deduction. Attach Form 8903 35 36 Add lines 23 through 35 37 Subtract line 36 from line 22. This is your adjusted gross income -36 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 2017)