Alton Newman, age 67, is married and files a joint return with his wife, Clair, age 65. Alton and Clair are both retired, and during 2015, they received Social Security benefits of $10,000. Both Alton and Clair are covered by Medicare. Alton's Social Security number is 111-11-1112, and Clair's is 123-45-6789. They reside at 210 College Drive, Columbia, SC 29201.
Alton, who retired on January 1, 2015, receives benefits from a qualified pension plan of $2,750 a month for life. His total contributions to the plan (none of which were deductible) were $168,250. In January 2015, he received a bonus of $2,000 from his former employer for service performed in 2014. Although the former employer accrued the bonus in 2014, it was not paid until 2015. Clair, who retired on December 31, 2014, started receiving benefits of $1,400 a month on January 1, 2015. Her contributions to the qualified pension plan (none of which were deductible) were $74,100.
On September 27, 2015, Alton and Clair received a pro rata 10% stock dividend on 600 shares of stock they owned. They had bought the stock on March 5, 2008, for $20 a share. On December 16, 2015, they sold the 60 dividend shares for $55 a share. On October 10, 2015, Clair sold the car she had used in commuting to and from work for $17,000. She had paid $31,000 for the car in 2009.
On July 14, 2007, Alton and Clair received a gift of 1,000 shares of stock from their son, Thomas. Thomas's basis in the stock was $35 a share (fair market value at the date of gift was $25). No gift tax was paid on the transfer. Alton and Clair sold the stock on October 8, 2015, for $24 a share.
On May 1, 2015, Clair's mother died, and Clair inherited her personal residence. In February 2015, her mother had paid the property taxes for 2015 of $2,100. The residence had a fair market value of $235,000 and an adjusted basis to the mother of $160,000 on the date of her death. Clair listed the house with a real estate agent, who estimated it was worth $240,000 as of December 31, 2015.
Clair received rent income of $6,000 on a beach house she inherited three years ago from her uncle Charles. She had rented the property for one week during the July 4 weekend and one week during the Thanksgiving holiday. Charles's adjusted basis in the beach house was $150,000, and its fair market value on the date of his death was $240,000. Clair and Alton used the beach house for personal purposes for
56 days during the year. Expenses associated with the house were $3,700 for utilities, maintenance, and repairs; $2,200 for property taxes; and $800 for insurance. There are no mortgages on the property.
Clair and Alton paid estimated Federal income tax of $3,100 and had itemized deductions of $6,800 (excluding any itemized deductions associated with the beach house). If they have overpaid their Federal income tax, they want the amount refunded. Both Clair and Alton want $3 to go to the Presidential Election Campaign Fund. Compute their net tax payable or refund due for 2015. If you use tax forms for your computations, you will need at a minimum Form 1040 and Schedule D. Suggested software: H&R BLOCK Tax Software.