Logan B Taylor is a widow whose wife, Sara died on June 6, 2018. He lives at
Question:
Logan B Taylor is a widow whose wife, Sara died on June 6, 2018. He lives at 4680 Dogwood Lane, Bakersfield, CA 93301. He is employed as a paralegal by a local law firm. During 2020, he had the following receipts:
Salary $80,000
Interest income
City of Bakersfield general purpose bond $3,000
Money market account at Omni Bank 300
Savings account at Boone State Bank 1,100 4,400
Inheritance from Daniel 60,000
Life insurances proceeds 200,000
Amount from sale of Lancaster lot 80,000
Proceeds from estate sale 9,000
Federal income tax refund (for 2019 tax overpayment) 700
Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2020. Logan also was the designated beneficiary of an insurance policy on Daniel’s life with a maturity value of $200,000. The lot in Lancaster was purchased on May 2, 2013, for $85,000 and held as an investment. As the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2020, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.
Logan’s expenditures for 2020 include the following:
Medicare expenses (including $10,500 for dental) $11,500
Taxes—
State of CA income tax (includes withholdings during 2020) $3,200
Property taxes on personal residence 4,500 7,700
Interest on home mortgage 4,600
Contributions to church (paid pledges for 2020 and 2021) 4,800
Logan and his dependents are covered by his employer’s health insurance policy for all of 2020. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helen’s implants. Helen is Logan’s widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 4, 2020, upon the advice of his pastor, he prepaid his pledge for 2021.
Logan’s household, all of whom he supports, includes the following:
Social Security Number Birth Date
Logan Taylor (age 48) 123-45-6787 08/30/1972
Helen Taylor (age 70) 123-45-6780 01/13/1950
Asher Taylor (age 23) 123-45-6783 07/18/1997
Mia Taylor (age 22) 123-45-6784 02/16/1998
Helen receives a modest Social Security benefit. Asher, a son, is a full-time student in dental school and earns $4,500 as a part time dental assistant. Mia, a daughter, does not work and is engaged to be married.
Using the appropriate forms and schedules, compute Logan’s federal income tax for 2020. Federal income tax of $5,500 was withheld from his wages. If Logan has any overpayment on his income tax, he wants the refund sent to him. Assume that the proper amounts of Social Security and Medicare taxes were withheld.