Question

Practice Set #2 Due June 28, 2021  - at 10:00 pm

 

This practice set will build on the Practice Set #1.

All facts remain the same as in Practice Set #1. In addition to the facts in Practice Set #1, Mary has now started a business. She has named her business Mary’s Crafts – Made to Order. It is a SMLLC. Additionally, Eric wants to take an exotic vacation. He has heard wonderful things about climbing Mount Everest. To fund the trip he decides to sell stock that has been previously gifted to him. The general details for Eric, Mary and the children remain the same as in Practice Set #1.

To complete this Practice Set #2, please add to your Practice Set #1 tax return the following activity:

·        See excel schedule for activity from Mary’s Crafts – Made to Order. Please review the income and expenses and other details and include the activity in the Amoth’s return.

·        To fund the Amoth’s vacation this year they have chosen to sell several gifts that they have received through the years.  The first of these was 100 shares of Dupont stock they had received as a gift in January 2005.  Uncle Billy had a basis in the stock of $70,000. At the time of the gift the FMV of the stock was $100,000. Eric sells the stock for $100,000 on 11/1/20.

·        Eric also sold for $90,000 on 6/1/2020 the 100 shares of Apple stock that Uncle Billy gave him in 2017. The FMV at the time of the gift was $100,000 and Uncle Billy’s basis was $120,000.

·        The last stock was 50 shares of Dollar Tree. Eric decided to sell it on 7/27/20 for $115,000 Uncle Billy gave him for Christmas 2016. Ironically, Uncle Billy’s basis in these shares was $120,000 and FMV at the time of the gift was $100,000.

 

Remember to include the activity from Practice Set #1. The details were:

·        Eric received $200,000 in salary from Red Steel Corporation, where he is a construction engineer. Federal withholding was $37,750 and the appropriate FICA and Medicare withholding was done. CA withholding was $15,100.

·        Eric’s mother passed away 6/22/2020. He received a parcel of land worth $50,000 on 6/22/2020, no alternative valuation date was elected. He sold the land on 12/24/2020 for $50,600. He also received life insurance proceeds in the amount of $150,000. He invested a portion of the proceeds from the sale into Disney stock for his three children. The value of the Disney stock at the time of purchase was $10,000 per child.

·        Eric and Mary received $10,400 from Los Angeles school district bonds.

·        Eric received $5,300 interest from a Merrill Lynch money market account.

·        Eric received $15,000 of dividend income from Ford Motor Company stock that he owned for over 2 years.

·        The Amoth’s gave to the Goodwill items with a FMV of $650. They provided the receipt for the household goods donated on 7/15. The goodwill is the local one in Mockingbird Heights at 123 High Street.

·        The Amoths own their home. They provided to you a Form 1098 with the mortgage interest paid by them to Rocket Mortgage. The total interest was $14,000. Additionally, the property taxes were impounded by Rocket Mortgagee and were $4,500 for the year.

·        The Amoths made charitable contributions to recognized charities for which they have receipts in the amount of $15,800.

·        Additionally, the Amoths made a contribution of $3,500 to the Reelect Major Munster’s political campaign.

·        Eric and Mary wish to contribute the maximum to an Individual Retirement Account for 2020 for each of them. There is no retirement plan at Red Steel Corporation.

Compute the Amoth’s net federal tax payable (or refund due) for 2020. The 1040 and applicable other forms that would be needed to file a tax return with the IRS in 2020. DO NOT PREPARE THE CALIFORNIA RETURN.

In addition to the federal return for 2020, you will need to prepare a narrative explaining all of the items in this problem and why the income items are taxable or nontaxable and why the deduction items in this problem are deductible or nondeductible. Returns without the narrative will not be graded.

The assignment is due June 28, 2021 at 11:00pm. 

Late practice sets with narratives will be accepted at 50%.

Could you guy build in the real 1040 from I need that for this project?

Thank you so much.