Your office is picking up a new high-profile client and you have been assigned the task of preparing her 2020 tax estimate. In the past, she used an accountant to file a tax return with her (now ex) husband, so this change in her personal circumstances, as well some significant changes in her asset holdings, have her reaching out to a professional for assistance. She wants an understanding of her estimated 2020 liability so she can project her cash flow needs for taxes and free cash for investing.

Easter Bunny is a successful entrepreneur. She spent many years operating a gift boutique and investing in real estate with her husband, but they divorced in 2019. As part of the divorce settlement Easter was awarded approximately of the marital assets (outside of their business ventures) and alimony of $5,000 per month for 10 years. Her husband retained the business and Easter took ownership of the apartment building and one personal residence which she now lives in and refinanced in her name only.

When she has free time, she occasionally works as a delivery driver if her friend, Tooth Fairy, needs assistance. She expects to make about $15,000. She is treated as an independent contractor, so no taxes are withheld.

She sold a portion of her stock investments to make upgrades to her rental property as well as her personal residence.

Last year she invested in a new logistics start-up venture formed by her good friend, Santa Claus, but the company was not successful and will close by years end.

She has a sizable investment portfolio of stocks as well as excess cash that is currently not generating significant returns and is open to tax planning suggestions as she looks to the future. She needs to save for retirement, send her daughter to college and fund a pledge that she made to a local charity to fund the development of an outdoor recreation center for young children.

She will provide information on 2020 to the best of her ability via the client portal. Unfortunately, she does not have access to her 2019 return.

Your reviewer has asked you to prepare a 2020 Federal income tax projection for Easter based on the information she has provided. Your projection will be used during a meeting and discussion with Easter, so it should be in a user-friendly format, with necessary supporting details for your manager to review.

Information from client portal:

She invested $10,000 in the startup venture that was unsuccessful. She did not earn anything from it. there were no expenses for researching a new business

Interest earned from other investments was $4,000.

She has one dependent that she supports. Dependent is not blind

Birth date: December 3, 1971

State of residence: Arizona

Business mileage driven for Tooth Fairy: 6,000 miles

sold $50,000 of stock that was allocated to her during the divorce settlement. It was purchased a few years ago for $41,000.

donated $2,500 to the Red Cross, $2,000 to her church, donated used household furnishings and clothes to Goodwill. Estimated to have paid over $10,000 for the clothes and furnishings but valued them at $1,500 on her receipt.

mortgage is $300,000. loan was refinanced in her name only when she got divorced, paid standard lender's fees and title work, did not pay for any points

Spends $400 per month on health insurance

received full stimulus payments in 2020

mortgage interest is $9,000

property tax: $5,500 for personal residence, $15,000 for apartment complex

$8,500 in "other expenses" on main street apartment sheet. party held for tenants as a gift cost $5,600 and the remaining $2,900 was a fine paid for improper waste disposal

depreciation for apartment: $32,000 cost on completion of work in June. does not have a new roof.

no gambling winnings, disaster losses, interest paid on student loans, or money from an estate or trust

Main Street Apartment Sheet

Main Street Apartments

Net Income 2020

Rent Revenue $ 240,000

Expenses

Capital Improvements and Repairs $ 32,000

Utilities - Gas, Water, Sewer $ 10,000

Interest - Mortgage Note $ 22,500

Depreciation $ 22,000

Insurance $ 10,000

Professional Services $ 11,000

Real Estate Taxes $ 15,000

Part time help $ 14,000

Payroll Taxes $ 1,400

Other $ 8,500

Total Expenses $ 146,400

Net Income $ 93,600

All information given has been provided above. Please show all work if possible. This is a computation of their 2020 Federal Income tax projection.