ulative Problems 51. Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6789. Ashley is single and has a 20-year-old son, B His Social Security number is 111-11-1112. Bill lives with Ashley, and she full supports him. Bill spent 2018 traveling in Europe and was not a college student He had gross income of $4,655 in 2018. Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2018, and many of her expenses were not reimbursed by her health insurance. oblem Ashley owns Panda Enterprises, LLC 98-7654321), a data processing service which she operates as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2018 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses (before the 50% reduction) of $22,000, and rent expense of $34,000 The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year Ashley has an extensive stock portfolio and has prepared the following analysis Date Total Number of Shares Purchased Date Sold Per-SharePer-Share Stock Cost Selling Price Dividends $30 70 45 Beige Garland Peach 10 30 15 10/18/17 10/11/18 10/11/11 10/11/18 3/10/18 8/11/18 $80 43 62 s 74 157 Note: Ashley received a Form 1099-B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the selling price is net of commissions. Also, the dividends are the actual dividends received in 2018. these are both ordinary dividends and qualified dividends. Ashley had $800 of interest income from State of Ohio bonds and $600 of to her income on her Wayne Savings Bank account. She paid $25,000 of alimon former husband. His Social Security number is 123-45-6788. shley itemizes her deductions and provides the following information may be relevant to her return: tion, which Losses Unreimbursed medical expenses for $11,78 Does not include health insurance Ashley State income taxes paid Real property taxes on personal 1,830 3,230 Interest paid on home mortgage The loan is secured by the residence and was 8137 Form 1098 Charikable contributions incurred when the home was purchased ,399 $940 cash payments to Ashley's church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expendtures Sales taxes 619 Amount per sales tax table. Ashley made a $26,000 estimated Federal income tax payment, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2019 taxes Compute Ashley's net tax payable or refund due for 2018. If you use tax forms for your computations, you will need Form 1040 and its Schedules A, C, D, and SE and Form 89-49. Ashley qualifies for the & 199A deduction for qualafied busi- ness income. Be sure to include that in your calculations 52 Paul Barrone is a grachuate student at State University. His 10-year-old son, Jamie, lives Tax Computa Communicat with him, and Paul is Jamie's sole support. Pau's wife died in 2017, and Paul has not remarried. Paul received $320,000 of life insurance proceeds Grelated to his wifes death) in early 2018 and immediately invested the entire amount as shown below Date Selling Dividends Acquired Cost Date Sold Price Interest 12/03/18 1,000 shares Blue 01/23/18 400 shares Magenta01/23/18 600 shares Orange 100 shares Brown Green bonds Gold money market $ 14,000 23.000 $3,500 None $750 $2,300 None $1,200 01/23/18 230,000 06/23/12 01/23/18 23,000 2,800 01/23/18 14,000 01/23/18 30,000 accoun $600 Paul had $42,000 of taxable graduate assistant earnings from State University and received a $10,000 scholarship. He used $8,000 of the scholarship to pay his tuition and fees for the year and $2,000 for Jamie's day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. Paul received a statement related to the Green bonds saying that there was $45 of original issue discount amortiza- tion during 2018. Paul maintains the receipts for the sales taxes he paid of $735 Paul lives at 1610 Cherry Lane, Bradenton, FL 34212, and his Social Security number is 111-11-1111. Jamie's Social Security number is 123-45-6789. The university withbeld $2,000 of Federal income tax from Paul's salary. Paul is not itemizing his deductions Part 1-Tax Computation Compute Paul's lowest tax liability for 2018 Part 2-Tax Planning Paul is concerned because the Green bonds were worth only $18,000 at the end of 2018, $5,000 less than he paid for them. He is an inexperienced investor and wants to know if this $5,000 is deductible. The bonds had original issue discount of $2,000 when he purchased them, and he is curious about how that affects his investment in the bonds. The bonds had 20 years left to maturity when he pur- chased Also, them. Draft a brief letter to Paul explaining how to handle these items. prepare a memo for Paul's tax file