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Tom and Megan Brown are married with three children, all of whom live at home. The children are ages 1 8 , 1 5 ,

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.
image text in transcribed

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