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

$1$

$8$

$,$

$1$

$5$

$,$

$$and

$8$

$.$

a

$.$

$$Tom is a loan officer at First Lubbock Bank and his annual salary is $

$1$

$0$

$0$

$,$

$0$

$1$

$0$

$.$

$$Federal withholding

was $

$1$

$7$

$,$

$1$

$3$

$1$

$.$

b

$.$

$$First Lubbock provides employees with free group

$-$

term life insurance equal to their annual gross

salary, up to $

$5$

$0$

$,$

$0$

$0$

$0$

$,$

$$and free health and accident insurance. Tom

$$

s health and accident insurance

cost First Lubbock $

$3$

$,$

$5$

$0$

$0$

$.$

$$The bank

$$

s cost of his group

$-$

term life insurance coverage is $

$7$

$0$

$0$

$.$

$$The

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

$

$2$

$,$

$7$

$5$

$0$

$.$

c

$.$

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

$6$

$,$

$0$

$0$

$0$

per year.

d

$.$

$$In June, Tom was recognized for being with the bank for

$2$

$0$

$$years$.$ Tom received a watch worth $

$3$

$0$

$0$

and $

$1$

$,$

$5$

$0$

$0$

$$cash$.$

e

$.$

$$Megan lost her job in January last year. She received unemployment compensation totaling $

$2$

$1$

$,$

$7$

$2$

$0$

$.$

f

$.$

$$In October, Tom was in a car accident. He received $

$1$

$5$

$5$

$,$

$0$

$0$

$0$

$$for pain and suffering and $

$2$

$0$

$,$

$0$

$0$

$0$

$$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 $

$3$

$,$

$0$

$0$

$0$

$$and

child support totaled $

$9$

$,$

$0$

$0$

$0$

$.$

$$The divorce was finalized in

$2$

$0$

$1$

$2$

$.$

h

$.$

$$The Browns received interest income of $

$9$

$3$

$7$

$$from a savings account, $

$6$

$1$

$1$

$$from a US Treasury bond

and $

$4$

$2$

$3$

$$from bond issued by the City of Lubbock.

i

$.$

$$Also during the year, Megan received a cash gift of $

$2$

$0$

$,$

$0$

$0$

$0$

$$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 $

$5$

$0$

$0$

$,$

$0$

$0$

$0$

$$and their basis in the property was

$

$2$

$2$

$5$

$,$

$0$

$0$

$0$

$.$

k

$.$

$$Tom won $

$5$

$,$

$9$

$0$

$0$

$$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 $

$2$

$,$

$7$

$3$

$2$

$$deduction for state taxes paid. The Browns did itemize

their deductions that year

$($

itemized deductions equaled

$2$

$7$

$,$

$9$

$5$

$0$

$)$

$.$

$$They received a $

$3$

$6$

$4$

$$refund from

state income tax paid.

m

$.$

$$Megan is a

$2$

$5$

$\%$

$$partner in XYZ partnership. Her share of income was $

$2$

$2$

$,$

$1$

$9$

$6$

$.$

$$She received a

distribution of $

$1$

$6$

$,$

$0$

$0$

$0$

$.$

n

$.$

$$Tom purchased

$9$

$0$

$0$

$$shares of ABC stock at the beginning of the year for $

$1$

$7$

$.$

$5$

$0$

$$per share. The stock

is currently trading at $

$1$

$2$

$.$

$7$

$5$

$$per share. The shares did pay dividends of $

$1$

$.$

$5$

$0$

$$per share on

December

$1$

$.$

Income Tax Accounting

Acct

$3$

$3$

$0$

$7$

Unit

$1$

$$Tax Return Fact Pattern

$2$

o

$.$

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

her $

$4$

$5$

$,$

$0$

$0$

$0$

$$for lost wages.

p

$.$

$$During the year, the Browns paid $

$1$

$,$

$9$

$7$

$7$

$$for qualified medical expenses. Megan submits the receipts

to the medical insurance company and is reimbursed $

$1$

$,$

$9$

$7$

$7$

$.$

q

$.$

$$Deductions for AGI total $

$4$

$,$

$5$

$0$

$0$

$.$

$$Itemized deductions total $

$1$

$8$

$,$

$9$

$1$

$7$

$.$

$$The Browns qualify for $

$4$

$,$

$5$

$0$

$0$

in child tax and other dependent credits.

r

$.$

$$The taxpayers paid estimated tax payments of $

$1$

$4$

$,$

$0$

$0$

$0$

$.$

Tax Staff,

I have a project for you and your partner. I need you to review the prepared

$2$

$0$

$2$

$3$

$$Form

$1$

$0$

$4$

$0$

$$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.