1. What is the net Form W-2 wages? 2. What is miscellaneous income? 3. What is Schedule...

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Question:

1. What is the net Form W-2 wages?
2. What is miscellaneous income?
3. What is Schedule B income (Interest and dividends)?
4. What is Schedule C net income (Business income)?
5. What is Schedule D net income (Capital gains and losses)?
6. What is Schedule E depreciation (Rental property)?
7. What is Schedule E net income (Rental income & Sub-S income)?
8. What is the total “For AGI” deductions?
9. What is Adjusted Gross Income?
10. What is the Schedule A deduction for taxes?
11. What is the Schedule A deduction for interest expense?
12. What is the Schedule A deduction for charitable contributions?
13. What is the Schedule A total itemized deductions?
14. What is the qualified business income deduction?
15. What is taxable income?
16. What is the tax on ordinary income?
17. What is the tax on long-term capital gain (loss) and qualified dividends?
18. What is the self-employment tax?
19. What is the kiddie tax?
20. What is the balance due or (refund)?

Facts:
1. Paul Turner is single and has two children, Allen and Lee Ann, from his previous marriage. Allen lives with Paul and Paul provides more than half of his support. In the current year, Allen earned $300 of interest income and $5,000 working at a fast-food restaurant. Allen graduated from high-school in December 2019 and was not a registered student during 2020. Lee Ann lives with her mother, Wilma (Lee Ann lived with Wilma for all of the current year). Wilma provides more than half of Lee Ann's support. Paul pays “alimony” of $400 per month to Wilma pursuant to a divorce degree entered into in 2014. The payments are to continue until Lee Ann reaches age 18, when they will be reduced to $250. Paul uses the cash method of accounting and a calendar year for reporting. Paul's birthday is May 31, 1979. Allen's birthday is October 5, 2002. Lee Ann's birthday is December 1, 2006. Paul prefers to report any “kiddie tax” on his tax return.

2. Paul is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). Paul's pay stubs indicate that he had $7,320 withheld in federal taxes, $4,987 in state taxes. He earned $90,000 of wages subject to employee Social Security taxes and Medicare taxes. ASCI has an extensive fringe benefits program for its employees.

3. Paul earned salary of $88,000 (before subtracting his 401(k) and flexible spending plan contributions and before adding any additional possible income items described in paragraphs 4-7, 11). He contributed $7,200 to his 401(k) account, and he contributed $2,600 to his flexible spending account to purchase additional health insurance.

4. ASCI paid $632 of whole life insurance premiums to cover Paul's personal whole life insurance policy with a face value of $50,000. ASCI also paid health club dues of $825 to a nearby health club on Paul's behalf.

5. Taking advantage of ASCI's educational assistance program, during the fall Paul enrolled in two graduate engineering classes at a local college. ASCI paid his tuition, fees, and other course-related costs of $5,300.

6. Paul received free parking in the company's security garage that would normally cost $200 per month.

7. Paul manages the safety program for ASCI. In recognition of his superior handling of three potential crises during the year, Paul was awarded the Employee Safety Award on December 15. The cash award was $400.

8. On January 15, of the current year, Paul's father died. From his father's estate, he received stock valued at $30,000 (father’s basis was $12,000) and his father's house valued at $95,000 (father’s basis in the house was $55,000).

9. Paul owns several other investments and received the following information reports for the current tax year:
Form 1009-Div:
General Dynamics – Gross qualified dividends - $400
Form 1099-Int
New Jersey Economic Development bonds – Gross interest - $300
IBM bonds – Gross interest - $600
State of Nebraska bonds – Gross Interest - $200
10. In addition to the investments discussed above, Paul owns 1,000 shares (1%) of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding. Grubstake reported taxable income of $200,000 and paid a distribution of $1.00 per share during the current year. Paul does not materially participate in Grubstake's activities.

11. Paul slipped on a wet spot in front of a computer store last July. He broke his ankle and was unable to work for two weeks. He incurred $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave him $1,000 for pain and suffering resulting from the injury. ASCI did not pay his salary during the two weeks he missed because of the accident. However, ASCI's disability insurance plan paid him $1,500 in disability pay for the time he was unable to work. Under this plan, ASCI pays the premiums of $500 for the disability insurance as a taxable fringe benefit. The disability plan premiums and the disability benefit payments were not included in Paul’s W-2 wages reported in paragraph 3.

12. Paul received a Form 1099-B from his broker for the sale of the following securities during the current year. The adjusted basis amounts were reported to the IRS.
Security Sale Date Purchase Date Sales Price Commission aid Sale His Basis
Nebraska bonds 03/14/20 10/22/10 $2,300 $200 $1,890
Cassill Corp
(500 shares) 10/20/20
02/19/15 $8,500 $425 $9,760
13. In addition to the taxes withheld from his salary, he also made timely estimated federal tax payments of $175 per quarter and timely estimated state income tax payments of $150 for the first three quarters. The $150 fourth-quarter state payment was made on December 28 of the current year. Paul would like to receive a refund for any overpayment.

14. In August of the current year, he received a federal refund of $60 and a state tax refund of $200 related to the tax returns he filed for the prior year. His itemized deductions for the prior year were $18,800.

15. Paul found a renter for his father's house on August 1. The monthly rent is $600, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months' rent and a $600 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On August 1, Paul received $1,800 from the tenant per the terms of the lease agreement. In November, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December, he reduced his rental payment to $300 to compensate for the plumbing repairs. Paul provides you with the following additional information for the rental in the current year.

Property taxes $720
Other maintenance expenses 285
Insurance expense 495
Management fee 350
Depreciation (to be computed) ?
Local practice is to allocate 10 percent of the fair market value of the property to the land. (See ¶8 for basis information.) Paul makes all decisions with respect to the property. This rental activity qualifies as a trade or business under the Internal Revenue Code for purposes of the Qualified Business Income deduction.

16. Paul paid $4,050 in real estate taxes on his principal residence. The real estate tax is used to pay for town schools and other municipal services.

17. Paul drives a 2017 Acura TL. His car registration fee (based on the car year) is $50 and covers the period 1/1/20 through 12/31/20. In addition, he paid $280 in property tax to the state based on the book value of the car.

18. In addition to the medical costs presented in ¶11, Paul incurred the following unreimbursed medical costs:
Dentist $ 310
Doctor 390
Prescription drugs 215
Over-the-counter drugs 140
Optometrist 125
Emergency room charges 440
LASIK eye surgery 2,000
Chiropractor 265
19. Paul paid interest to his lenders as follows:
Primary home mortgage $7,200
Home-equity loan 435 (not acquisition debt)
Credit cards 498
Car loan 390
20. On May 14 of the current year, Paul contributed clothing to the Salvation Army. The original cost of the clothing was $740. He has substantiation valuing the donation at $360. In addition, he made the following cash contributions and received a statement from each of the following organizations acknowledging his contribution:
Larkin College $800
United Way 152
First Methodist Church 790
Amos House (homeless shelter) 200
Local Chamber of Commerce 100
All of the above entities are nonprofit corporations and §501( c)(3) organizations except the Chamber of Commerce which is not a §501( c)(3) organization.