Tom and Megan Brown are married with three children, all of whom live at home. The children are ages

$18,15,$ and $8.$

a$.$ Tom is a loan officer at First Lubbock Bank and his annual salary is $$100,010.$ Federal withholding

was $$17,131.$

b$.$ First Lubbock provides employees with free group$-$term life insurance equal to their annual gross

salary, up to $$50,000,$ and free health and accident insurance. Tom$$s health and accident insurance

cost First Lubbock $$3,500.$ The bank$$s cost of his group$-$term life insurance coverage is $$700.$ The

bank also provides whole life insurance for all officers. The cost of the whole life insurance is

$$2,750.$

c$.$ The company also provides Tom with a membership to Lubbock Golf Club. The dues total $$6,000$

per year.

d$.$ In June, Tom was recognized for being with the bank for $20$ years. Tom received a watch worth $$300$

and $$1,500$ cash.

e$.$ Megan lost her job in January last year. She received unemployment compensation totaling $$21,720.$

f$.$ In October, Tom was in a car accident. He received $$155,000$ for pain and suffering and $$20,000$ in

punitive damages.

g$.$ The Brown$$s two oldest children are from Megan$$s first marriage. $($The Browns claim all $3$ children

as dependents.$)$ Megan continues to receive alimony and child support. Alimony totaled $$3,000$ and

child support totaled $$9,000.$ The divorce was finalized in $2012.$

h$.$ The Browns received interest income of $$937$ from a savings account, $$611$ from a US Treasury bond

and $$423$ from bond issued by the City of Lubbock.

i$.$ Also during the year, Megan received a cash gift of $$20,000$ from her parents.

j$.$ The couple sold their home during the year and purchased a new one. The couple had owned and

lived in the home for $8$ years. The house sold for $$500,000$ and their basis in the property was

$$225,000.$

k$.$ Tom won $$5,900$ at a slot machine in Las Vegas.

l$.$ In the prior tax year, Megan had New Mexico earnings so they had to file a state return. On their

federal tax return, the Browns took a $$2,732$ deduction for state taxes paid. The Browns did itemize

their deductions that year $($itemized deductions equaled $27,950).$ They received a $$364$ refund from

state income tax paid.

m$.$ Megan is a $25\%$ partner in XYZ partnership. Her share of income was $$22,196.$ She received a

distribution of $$16,000.$

n$.$ Tom purchased $900$ shares of ABC stock at the beginning of the year for $$17\mathrm{.}50$ per share. The stock

is currently trading at $$12\mathrm{.}75$ per share. The shares did pay dividends of $$1\mathrm{.}50$ per share on

December $1.$

Income Tax Accounting

Acct $3307$

Unit $1$ Tax Return Fact Pattern

$2$

o$.$ In May, Megan filed suit against her former employer for wrongful termination. The judge awarded

her $$45,000$ for lost wages.

p$.$ During the year, the Browns paid $$1,977$ for qualified medical expenses. Megan submits the receipts

to the medical insurance company and is reimbursed $$1,977.$

q$.$ Deductions for AGI total $$4,500.$ Itemized deductions total $$18,917.$ The Browns qualify for $$4,500$

in child tax and other dependent credits.

r$.$ The taxpayers paid estimated tax payments of $$14,000.$

Tax Staff,

I have a project for you and your partner. I need you to review the prepared $2023$ Form $1040$ based on

the included information$/$fact pattern for our clients Tom and Megan Brown.

I know there are $5$ errors$/$inaccuracies within the prepared return that I need you to identify. Once they

have been identified, I need you to make corrections and recalculate the correct tax due$/$refund owed.

Note: The tax liability$/$tax due$/$refund owed calculation is incorrect due to the $5$ errors$/$inaccuracies within

the return; however, it is not included as one of the error$/$inaccuracies$.$

Please note that you are required to work with a partner $($unless you have received previous instructor

approval$)$ on this return.

The printed individual income tax formula and calculations, list of errors, and corrected tax return

will need to be turned in at the beginning of class on Monday, February $5,2024.$ Please work on the

project only within your partner teams and do not collaborate with other teams. Only one project ne