TAX RETURN PROBLEM #3 PREPARE FOR 2021 TAX YEAR Jay Mars, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150-51 Ave. A, Long Beach, NY 11561. Jay has a 5-year-old child, Sylvie, who lives with her mother, Pearl. As a result of his divorce in 2016, Jay pays alimony of $6,000 per year to Pearl and child support of $12,000. The $12,000 of child support covers 65% of Pearl's costs of rearing Sylvie. Sylvie's Social Security number is 123-45- 6789, and Pearl's is 123-45-6788. Jay's mother, Sara, lived with him until her death in early September 2021. He incurred and paid medical expenses for her of $12,900 and other support payments of $11,000. Sara's only sources of income were $5,500 of interest income on certificates of deposit and $5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Jay's household. Sara's Social Security number was 123-45-6787. Jay is employed by the Highway Department of the City of Long Beach in an executive position. His salary is $95,000. The appropriate amounts of Social Security tax (6.2%) and Medicare tax (1.45%) were withheld. In addition, $9,500 was withheld for Federal income taxes, and $4,000 was withheld for state income taxes. No City taxes are withheld, nor is he liable to file a Long Beach tax return In addition to his salary, Jay's employer provides him with the following fringe benefit: Group health insurance plan. Jay's employer paid premiums of $5,800 for his coverage. The plan paid $2,600 for Jay's medical expenses during the year. No NYS income tax refund for 2020 received in 2021. Upon the death of his aunt Helen in December 2020, Jay, her only recognized heir, inherited the following assets: Asset Car Land-300 acres Apple stock Cash Helen's Adjusted Basis FMV at Date of Death $35,000 $19,000 90,000 175,000 15,000 40,000 10,000 10,000 Three months prior to her death, Helen gave Jay a mountain cabin. Her adjusted basis for the mountain cabin was $120,000, and the fair market value was $195,000. No gift taxes were paid. During the year, Jay had the following transactions: On February 1, 2021, he sold for $45,000 Meta stock that he inherited from his father four years ago. His father's adjusted basis was $49,000, and the fair market value at the date of the father's death was $41,000. The car Jay inherited from Helen was destroyed in a wreck on October 1, 2021. He had loaned the car to Pearl to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Pearl nor Sylvie was injured. Jay received insurance proceeds of $16,000, the fair market value of the car on October 1, 2021. On December 28, 2021, Jay sold the 300 acres of land inherited from Helen to his brother, James, for its fair market value of $160,000. James planned on using the land for his dairy farm. Other sources of income for Jay were as follows: Apple Dividend income (qualified dividends) $3,500 Interest income: Guaranty Bank 1,000 City of Long Beach water bonds 2,000 Award from City of Long Beach for outstanding suggestion for highway beautification (not considered work-related on Form 1099-MISC) 10,000 Potential itemized deductions for Jay, in addition to items already mentioned, were as follows: State and local property taxes paid on his residence and cabin Personal property taxes Estimated Federal income taxes paid Charitable contributions - all Cash of different amounts *Mortgage interest on his residence Orthodontic expenses for Sylvie $7,000 3,500 3,000 4,500 7,200 4,000 *Mortgage was originated 6/1/2017. Current outstanding principal of $100,000 REQUIRED: Compute Jay's net tax payable or (refund due) for 2021. Complete Forms 1040, Schedules 1, A, B & D, and Form 8949