Tax Return Problem

Form 1040 Gross Income Items

John, age 45, is an engineering professor. John was divorced in 2018 from his wife, Emma. Their 15-year-old-son, Sam, is supported fully by his parents (Emma paid $24,000 in child support) and lives with John during 2020. John signed Form 8332 and presented it to Emma for 2020 (included in client information).

John and his brother, Tom, equally provide 60% of the support for their mother, Taylor. She does not live with John or Tom. She has $12,000 of social security benefits and no other income. Tom has provided a signed statement that we would include in our workpapers as part of our due diligence.

Late in 2013, John inherited $1,000,000 from his grandfather. He invested $500,000 of the funds in a life annuity that began making monthly payments to John of $1,300 starting on January 2, 2014. John was 38 when the payments started. He invested the remaining $500,000 in the stock market.

John provides the following list of items that he believes to be deductible.

Unreimbursed doctor and dentist bills	1,800
Unreimbursed prescription drugs	300
Cost of medical insurance	3,000
Personal property taxes on auto	400
Taxes owing paid with 2019 Federal tax return (paid on 4/15/20)	175
Taxes owing paid with 2019 state tax return (paid on 5/15/20)	45
Cash contributions to the First Methodist church	2,400
Cash contributions to the Leukemia Society of America	400
Miscellaneous cash contributions to charities	100
Contribution of land to Habitat for Humanity on 12/31/20 (FMV = $10,000; original cost was $6,000 in 8/22/12)	?
Tax return preparation	1,000
Safe deposit box rental	30
Subscriptions to engineering journals not reimbursed by employer	175

State Estimated Tax Payments
4-15-2020	200
6-15-2020	200
9-15-2020	200
12-15-2020	200

Assume that John has all the needed documentation for his charitable contributions. You do not need to submit Form 8283 if you elect to itemize deductions. This form is completed by a professional appraiser, not the tax preparer, and attached to the return. We will assume that we have this form.

Required:

1. Prepare Form 1040 and needed schedules, including Schedule A (if elect to itemize or in workpapers if do not) and Schedule B.
2. Prepare any other IRS forms and your own supporting schedules as needed to be submitted to the IRS with the tax return.
3. Prepare working papers to support all decisions made, including dependents and filing status.