Richard and Elizabeth Doofuss, age 53 and 48, respectively, are married and they furnished over half of the total support of the following individuals: Harold, their son, age 19, is a sophomore at La Salle University. The Doofuss’ paid $25,000 in tuition and fees in 2020. Their daughter Hilda is 15 and in 10^th grade.

Richard is the sole shareholder of his own restaurant called “LaGarbage”, an S corporation. Richard’s salary from this business for 2020 was $39,000 and his federal income tax withheld was $3,900. In addition, the S corporation K-1 reported an ordinary income of $6,000.

Elizabeth is employed as an engineer for Lehigh Corp. where she earned $60,000 in wages and her federal income tax withheld was $3,200. Elizabeth contributed $6,000 to her 401(k) plan. In addition, Elizabeth was granted 100 NQO’s each giving her the right to purchase 1 share of Lehigh Corp stock for $10. In 2020, Elizabeth exercised the 100 options, received 100 shares of stock when the market price was $15. Lehigh Corp also paid for the Doofuss’ health insurance for $12,000, dental insurance for $2,400, and $50,000 of group-term life insurance coverage. Lehigh Corp. also paid $3,200 for a graduate course that Elizabeth took in pursuit of her graduate degree in Rocket Science.

The Doofuss’ received interest income of $142 from Citizens Bank, $200 interest income from U.S. savings bonds, and $100 of interest income on Pennsylvania municipal bonds.

During January 2020, Elizabeth was unemployed and collected unemployment compensation benefits of $2,000. Elizabeth also won $3,000 from her Fan Duel fantasy football team. She had no gambling or Fan Duel losses, she hopes to be the Eagles next General Manager.

During 2020, Richard and Elizabeth sold their four-year old house and bought a new residence. The selling price of the residence was $664,000. It had an adjusted basis of $214,000.

The Doofuss’ had sought the services of an investment counselor this year and were very unhappy with the results since they bought some IBM stock at the request of their counselor for $10,000 in June of 2020 and the value of that stock had dropped to $5,000 by year-end.

The Doofuss’ paid $500 in 2020 for the preparation of their 2020 income tax return. In addition they paid an investment advisor $600 for some investment advice.

They sold 300 shares of Arco stock for $5,500 on 9/11/20 that were purchased on 1/11/20 for $10,500.

During 2020, the Doofuss’ paid $4,000 in premiums for physical therapy fees, $700 for prescription drugs and medicines, and $2,800 in doctor fees. In addition, Elizabeth paid her dentist to perform a teeth whitening procedure for $300.

In 2020, they pledged $2,500 to their church and by December of that year had paid checks in the amount of $1,800. The Doofuss’ also donated used clothing with an original cost of $500 and fair market value of $200 to the Salvation Army.

On December 25, 2020 Richard received an iPad as a gift from his brother. The iPad is valued at $395. In addition, Elizabeth inherited a building on July 2, 2020, valued at $80,000 from her uncle.

The Doofuss’ paid $6,200 in interest on their mortgage ($150,000 balance) for their residence which they acquired in 2009. In 2013, they took out a home equity loan ($75,000 balance) to finance an addition to their residence. The interest expense on the home equity loan was $2,100 in 2020.

They also paid finance charges on credit cards of $500 and finance charges on a car loan of $800.

Richard contributed $6,000 to an IRA and Elizabeth contributed $3,000 to a Roth IRA.

The Doofuss’ paid $7,000 of real estate tax on their residence and had $4,000 withheld in state and local income taxes. They also paid approximately $750 in sales tax in 2020.

Please prepare the Doofuss’ 2020 individual income tax return.

Answer rating: 100% (QA)

Answer As of 12312020 Richard and Elizabeth Doofuss had gross income of 230000 From this amount they subtract their 20000 in itemized deductions which leaves them with taxable income of 210000 Elizabe... View the full answer