Question

Milly Manpower, age 45, is single and has no dependents. Her social security number is 987-65-4321. Milly lives at 3000 Westcliffe Drive, Cedar City, Utah 84720. She has no interest in contributing to any Presidential Election Campaign. The following are her tax related items:

1. Milly has a full-time job as a senior administrative assistant at Let’s Get To Work, Services, Inc. She earned a $60,000 salary from Let’s Go To Work, Inc. They withheld federal income tax of $6,000 and state income tax of $4,000.
2. Milly received a year end performance bonus from Let’s Go To Work, Inc. in the amount of $3,000.
3. $600 of interest income from Wells Fargo Bank.
4. $1,000 of interest income from Iron County Water District Bonds.
5. $1,200 of ordinary dividends (not qualified) from her stock portfolio.
6. Milly loaned her friend, Frank, $3,500 on July 1^st two years ago. At the inception of the loan arrangement, Frank signed a promissory note. He has repaid $500 of the loan. On September 1^st of the current year he declared bankruptcy. Frank told Milly that he will be unable to make any further payments on the loan. No Form 1099 was issued for the outstanding balance.
7. Milly’s aunt passed away and left her $300,000 cash which Milly immediately invested in the stock market.
8. For her birthday Milly’s grandmother gave her $2,000 in the form of a check.
9. While passing through McCarren airport in Las Vegas Milly spend $25.00 on the slots. She ended up winning $350.
10. Milly owns her own home. She received a 1098 from her bank showing that she paid $6,000 in interest expense and $4,500 in real property taxes.
11. Milly donated $2,000 to her local church and gave $100 to the American Heart Association.
12. Milly owns and operates Office Administration Services as a sole proprietor. Her business address is 555 Workhorse Dr., Cedar City, UT 84720. She is a cash basis taxpayer. She is a material participant in the business. She is not required to file any Forms 1099 for the business. Milly had the following income and expenses from the business:
    1. Gross Receipts $18,000
    2. Office expenses $1,000
    3. Rents $8,000
    4. Supplies $2,000
    5. Payroll taxes $600
    6. Utilities $4,000
    7. Wages $6,000
    8. Estimated Federal income tax payments $1,200
13. If Milly receives a federal income tax refund she will deposit it into her Wells Fargo checking account. Her routing number is 89898989 and her account number is 887886885. She does not want to authorize any person to discuss her tax return with the IRS.

REQUIREMENTS

Step 1. Prepare Tax Formula Spreadsheet:

Answer 1

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	60000
Bonus	3000
Interest	1600	Wells Fargo Bank = $600 Iron County Water District Bonds    = $1000
Dividends	1200	As its ordinary dividend taxable as per Tax slab
Gambling winning	350	As its less $5000 so with holding Tax of 24% is not applicable on it and it will be treated as other fringe inco3e
Short term capital Loss	-3000	3500-500= 3000 As its non business bad debts and its proved by the Frank that he is bankrupt , so the amount will be claimed as short term loss and it can be set off with short term capital gain and will be reported in form 8949 , as be can take capital loss deduction Upto $ 3000 form the income earned
Business Loss	-3600
Adjustable Gross income	59550
less itemized deduction	-13100	6000 interest expense + 5000 real property Taxes & State income tax are allowed as per itemized deduction rules of federal tax laws +2100 charity fully allowed ( we will take itemized deduction as its more than standard deduction
Taxable income	46450
Tax liability on base bracket	4573	As per 2019 tax slab Upto 39475 9700@ 10% = 970 (39475-9700 )* 12%=3573
Tax liability on excess over base@22%	1534.5	(46450-39475)*22%
Tax on Taxable Income	6107.5	(4573+1534.5)
Less federal taxes with hold	7200	With hold tax 6000 Estimated tax paid =1200
Refund	$1092.5

Calculation of business income

Gross receipts	$ 18000
Less office expense	- $1000
Less Rent	- $ 8000
Less supplies	- $ 2000
Less Wages	- $ 6000
Less utility	- $ 4000
Less payroll taxes	- $ $600
Business Loss	-3600

Gift received inheritance are not taxable , its taxable when income is generated from it so $300000 and check of $2000 are non taxable