1. Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201

(employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth’s birthday is July 4, 1974, and her Social Security number is 123-45-6785. She did not engage in any virtual currency transactions during the year, and she wants to contribute $3 to the Presidential Election Campaign Fund. Beth received the appropriate coronavirus recovery rebates (economic impact payments);

related questions in ProConnect Tax should be ignored.

The following information is shown on Beth’s Wage and Tax Statement (Form W–2) for 2020.

Line Description Amount 1 Wages, tips, other compensation $65,000.00 2 Federal income tax withheld 9,500.00 3 Social Security wages 65,000.00 4 Social Security tax withheld 4,030.00 5 Medicare wages and tips 65,000.00 6 Medicare tax withheld 942.50 15 State Arizona 16 State wages, tips, etc. 65,000.00 17 State income tax withheld 1,954.00 During the year, Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation.

Each corporation reported Beth’s dividend payments on a Form 1099–DIV.

Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2020. On her 2019 Federal income tax return, she used the standard deduction.

Fees earned from her part-time tax practice in 2020 totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.

On February 8, 2020, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, 2020, she sold the stock for $14 a share.

On January 2, 2020, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2020, for $55 a share. Both stock transactions were reported to Beth on Form 1099–B; basis was not reported to the IRS.

Beth bought a used sports utility vehicle for $6,000 on June 5, 2020. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, 2020, she sold the vehicle to a friend for $6,500.

During the year, Beth records revenues of $16,000 from the sale of a software program she developed. She incurred the following expenditures in connection with her software development business.

Cost of personal computer $7,000 Cost of printer 2,000 Furniture 3,000 Supplies 650 Fee paid to computer consultant 3,500 Beth elected to expense the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15, 2020, and used 100% in her business.
Although her employer suggested that Beth attend an in-person conference on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending. The $1,420 included $200 for the cost of meals.
During the year, Beth paid $300 for prescription medicines and $2,875 for medical bills. Medical insurance premiums were paid for her by her employer.
Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage (Valley National Bank) was $3,845, and credit card interest was $320.
Beth contributed $2,080 in cash to various qualifying charities during the year. Professional dues and subscriptions totaled $350. Beth paid estimated Federal income taxes of $1,000.
Part 1—Tax Computation Compute Beth Jordan’s 2020 Federal income tax payable (or refund due), and complete her 2020 tax return using appropriate forms and schedules. Suggested software: ProConnect Tax.
Part 2—Tax Planning Beth is anticipating significant changes in her life in 2021, and she has asked you to estimate her taxable income and tax liability for 2021. She just received word that she has been qualified to adopt a 2-year-old daughter. Beth expects that the adoption will be finalized in 2021 and that she will incur approximately $2,000 of adoption expenses. In addition, she expects to incur approximately $3,500 of child and dependent care expenses relating to the care of her new daughter, which will enable her to keep her job at Mesa Manufacturing Company.
However, with the additional demands on her time, she has decided to discontinue her two part-time jobs (i.e., the part-time tax practice and her software business), and she will cease making estimated income tax payments. In your computations, assume that all other 2021 income and expenses will be the same as 2020 amounts.