• You will find the 2018 Form 1040 and accompanying forms and schedules posted in the Course Information tab of Blackboard. Some of these forms are 2019 and some are 2018 because the IRS releases current versions of the forms at intermittent dates. If you do not have a form that is needed to complete the return, please go to IRS.GOV and put each schedule/form name (Form 1040, Schedules B, C, D, E, SE and Form 8949, Schedules 1, 2, 3, 4, 5) in the Search box on the IRS website.
• Once you have determined where the income goes on each form and schedule and have completed the items in the problem, scan the forms into your email and send them to the instructor.
• The problem states the filing status and number of dependents. You will need to enter the income on the correct form and then finish the return. I suggest that you read the entire problem and decide where the income item should go before you begin the return. (For example, salary goes on Form 1040 and self-employed income goes on Schedule C, then to Schedule 1, then the Schedule 1 total to Form 1040.
• Calculate the ordinary income tax using the schedules provided at the end of your textbook.
• You have learned that capital gains are taxed at preferential capital gains rates. You will need to calculate the capital gain separately for the sale of capital assets.
• We have also learned that qualified dividends are taxed at preferential capital gains rates. Please calculate the capital gains tax on these dividends.
• You need to calculate the self employment tax (Schedule SE) for the Schedule C income.
• Show on a separate piece of paper your income tax calculation. It should include the calculation of the ordinary income tax, the capital gains tax on sales of capital assets and capital gains tax on qualified dividends.
• When filling in an item on the Form 1040, place the number on the assignment it represents to the right and circle it. This will make it easier for me to grade and follow what you are doing. (So for line 7 on the Form 1040, you should include the salary amount and to the right put a number 3 and circle it.
• If there are items that are not included on the Form 1040 because they are not taxable, please indicate which items are not taxable and why on a separate sheet.
• Be sure to complete the top of the Form 1040 with the information that is provided. You may not have all of the information requested, but include what you are given in the problem.

Tax I Income Tax Return Facts

Bobby and Susie Chapman were married on December 31, 2019. They live at 755 Emerald Bay Drive, Rome, Georgia 30000. They want to file a joint income tax return based on the following information.

1. Bobby has one child, Samantha Chapman, who is 24 and a full-time student at the University of Georgia. She lives in the dorm except during the summer when she lives at home. Bobby provides more than half of Samanthas support. Samantha has a job as a research assistant where she made $15,500 during 2019 which has put in a savings account.

2. Susie has two children, James and John Smith. James and John are 22 and 25 respectively, live with Susie and Bobby and are models for an international clothing company. They are full time college students and work as models during the summer and school vacations. James made $35,000 last year modeling and John made $4,000. This income was placed in separate college funds for each child. Susie paid more than half of their support.

3. Bobby worked as a college professor at the local college. His salary reflected on his W-2 for the year is $72,000. His W-2 also reflected that he had $$6,000 withheld in federal income tax.

4. Bobby retired from his job as a professor at the local college on July 1, 2019. He receives $3,500 a month in retirement. Bobbys 1099-R reflects that $2,800 of these payments were taxable. The 1099-R also shows that he had $3,200 withheld in federal income tax during 2019.

5. Susie has $392 in interest income from US Treasury bonds. She also had $1,756 in interest from bonds issued by the State of Georgia.

6. Bobby received a Form 1099 INT indicating that he received $625 in interest income from a CD at the Bank of York. He also has corporate IBM bonds which paid $650 in interest during 2019.

7. James and John both have savings accounts at Bank of York. James received a Form 1099-INT indicating he had $225 in interest and Johns Form 1099-INT indicated that he had $345 in interest.

8. Susie works as a violin instructor and music teacher at Rome Academy. Her W-2 indicates that she had a salary of $22,500 during 2019 with $9,000 federal income tax withheld. Susie started working in August. She was unemployed from January until August and received $5,600 in unemployment benefits.

9. During October Susie was injured when she fell going up the stairs to perform. She received $1,875 in workmans compensation benefits. Her health insurance also paid $3,650 in payments to doctors and physical therapists as a result of her injury.

10. Susie, Bobby, and their dependents have health insurance through Bobbys employer, and this health insurance continues after Bobby retires. They pay $125 a month for insurance. The employer pays the remainder of the $800 premium. (The employer pays $275 a month for the insurance.)

11. When Bobby retired, he went on a trip with his friends and visited a casino where he won $3,600 gambling. The casino withheld $720 in federal income tax.

12. Bobbys father gave him a house at the beach when Bobby retired. The house was worth $1,200,000 on the date Bobby received the house, and Bobbys father paid $780,000 for the house in 2001.

13. Susie is also a self-employed violin instructor in addition to working as an employee of Rome Academy. She had net income of $7,800 during 2019 from her lessons. She also plays with the Atlanta Symphony from which she received a 1099 MISC in the amount of $18,000 for playing 6 concerts. She did not have any deductible expenses on the Schedule C.

14. Bobby purchased a small apartment building with four units when he retired so he would have something to do. His net rental income from the apartments is $15,250. He did not have any deductible expenses during the year. He also made estimated income tax payments for the third and fourth quarters of $800 each quarter.

15. Susies mother died during 2019, leaving Susie all of her jewelry. The jewelry is valued on the date of death at $52,600. Susie found all of the receipts where her mother had purchased the jewelry. Susies mother had paid $45,000 for all of the jewelry.

16. Susie owns several stocks. She received $850 in qualified dividends from Pepsi and $1,650 in ordinary dividends from GMC. She has owned both stocks several years.

17. When Bobby retired, Bobbys employer gave a huge party in his honor. They also presented him with a watch valued at $390 and a check in the amount of $2,500 celebrating his loyalty to the college and his working 30 years.

18. Bobby also owns an oil well. He received a 1099-MISC indicating that he had $4,800 in royalties during 2019.

19. Susie sold 500 shares of GMC stock for $400 per share on December 20, 2019. She had purchased the stock on October 24, 2014 for $220 a share.

20. Bobby and Susie have itemized deductions of $22,900 for 2019.

21. Susies employer, Rome Academy, gives free soft drinks and lunch valued at $1,200 while she is at work. Susie cannot leave work during the day to buy her lunch. They also provide Susie with five Rome Academy shirts worth $25 each. She is required to wear the Rome Academy shirts to work.

22. Rome Academy also provides Susie with a free card valued at $250 to attend all of the Rome Academy sporting events.

23. Bobby purchased a commercial real estate lot for $125,000 on April 20, 2019 for a business he wanted to start. He made $22,000 in improvements, leveling the lot and installing curbing and sidewalks. He has decided not to start the business and sold the lot on August 15, 2019 for $165,000. The selling expenses paid by Bobby were $5,200.

24. Bobby also owned a rental house that he purchased for $285,000 on June 7, 1990. The house sold on May 20, 2019 for $225,000.