Question

1 Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm During 2018, the Deans had the following receipts: Salaries (560,000 for Lance, $41,000 for Wanda) Interest income $101,000 City of Albuquerque general purpose bonds $1,000 1,100 400 Ford Motor company bonds Ally Bank certificate of deposit Child support payments from John Allen Annual gifts from parents Settlement from Roadrunner Touring Company Lottery winnings Federal income tax refund (for tax year 2017) 2,500 7,200 26,000 90,000 600 400 Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two childrn, Penny and Kyle. (Note Wanda has never issucd a Form 8332 waiver) Under the divorce decree, John was obligated to pay alimony and child support-the alimony payments were to termi- nate if Wanda remarried. In July, while going to lunch in downtown Sunt Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Tour- ing Company, paid her medical expenses (including a one-week stay in a hospital) To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settlement of the personal injuries she sustained The Deanshadh following cxpenditures for 2018 Medical expenses (not covered by insurance) $7,200 Property taxes on personal residence State of New Mexico income tax (includes amount withheld from wages during 2018) 7,800 Interest on home mortgage (First National Bank) Charitable contributions Life insurance premiums (policy on Lances life) Contribution to traditional IRA (on Wanda's behalf Traffic fines Contribution to the reelection campaign fund of the 1,200 5,000 300 mayor of Santa Fe Funeral expenses for Wayne Boye 500 The life insurance policy was taken out by Lance several years ago and desg nates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution. The Deans' household includes the following, for whom they provide more than half of the support: Birth Date 12/16/1976 08/08/1978 10/09/1999 Social Security Number Lance Dean (age 42) Wanda Dean (age 40) Penny Allen (age 19) Kyle Allen (age 16) Wayne Boyle (age 75) 06/15/1943 Penny graduated from high school on May 9, 2018, and is undecided about college. During 2018, she carned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotcl. Wayne is Wanda's widower father who dicd on December 20, 2017. For the past few years, Wayne qualified as a dependent of the Deans Federal income tax withheld is $1,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. Determine the Federal income tax for 2018 for the Deans on a joint retum by complcting the appropriate forms. They do not want to contribtto the Presidential Flection Campaign Fund. All members of the family had health care coverage for all of 2018. If an overpayment results, it is to be refunded to them.

Answer 1

Interest on local bonds of $1,000 is exempt. Gifts, child support, federal tax refunds, accident settlements are tax-exempt.
f1040sa--2016.pdf - Adobe Acrobat Pro DC File Edit View Wio Help 1040gi-. f1040sa X f1040--20 Home ools pdf x Sign In 57.3% SCHEDULE A (Form 1040) Department of he Treasury OMB No. 1546-0074 Itemized Deductions 2016 Information about Schedule A and its separate instructions is at www.irs.gov/schedulea. Attach to Form 1040 Ihtemal Revonue Service (9 No. 07 shown on Form 1040 our social security number Lance and Wanda Caution: Do not Include expenses relmbursed or pald by others. 1 Medical and dental expenses (see Instructions) 2 Enter amount from Form 1040,line 38 298,100 3 Multiply ine 2 by 10% (0.10). But if either you or your spouse was Dental Expenses ban before January 2, 1952, multiply line 2 by 7.596 (0.075) instead | 3 9,810 4 Subtract Ine 3 from line 1. If ine 3 is more than lIne 1, enter-0 5 Taxes You Paid State and local (check only one boxj: a Income taxes, or b General sales taxes 4,200 7 Personal property taxes 8 Other taxes. List type and amount 3,600 9 Add lInes 5 10 Home mortgage Interest and points reported to you on Fom 1098 10 6,000 11 Home mortgage Interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see Instructions and show that person's name, ldentufying no., and address You Paid Note: Your mortgage deduction may be limited (see 12 Points not reported to you on Form 1098. Seo Instructions for 12 13 14 special rules. . 13 Mortgage Insurance premlums (see Instructions) 14 Investment Interest. Attach Form 4952 lf required. (See instructions) 15 Add llnes 10 6,000 Gifts to 16 GIrts by cash or check. if you made any gift of $250 or more, If you made a 17 Other than by cash or check. If any girt of $250 or more, see gift and got a benefit for t Carryover see instructions. 1g Add lines 16 instructions. You must attach Fom 82831↑ over $500 . Caryover trom prior year . . . --.. - .. 17 18 . 18 - 19 3,600 Theft Losses 20 or thert lossles). Attach Form 4684. (See Instructions.) Job Expenses 21 Unrelmbursed employee expenses-Job travel, unlon dues, and Certain ob education, etc. Attach Form 2106 or 2106-EZ It required Miscellaneous See Instructions.) 23 Other exponses-Investment, sate deposit box, etc. List typo and amount 24 Add llnes 21 through 23 25 Enter amount from Form 1040, IIne 38 25 26 Multiply ine 25 by 2%(0.02) . . . . 27 Subtract ine 26 from line 24, If Iine 26 is more than line 24, enter-0 28 other-trom list in Instructions. List type and amount Total Itemized 29 IS Form 1040, Ine 38, over $155,6507 区 No. Your deduction is not limited. Add the amounts in the tar right column for lines 4 through 28. Also, enter this amount on Form 1040, line 40. Yes. Your deduction may be limited. See the Itemized Deductions Worksheet in the Instructions to ngure the amount to enter. 17.400 30 If you elect to itemlze deductions even though they are less than your standard check here For Paperwork Reduction Act Notice, see Form 1040 instructions. Cat. No. 17145C Schedule A Form 1040) 2016

f1040--2016.pdf - Adobe Acrobat Pro DC File Edit View Window Help Home Tools i1040gi--.. ..f1040sa-.1040-20..xSign In pdf +) | 57.3% :1040 ups. Individual Income Tax Return 2016|ONE №15450 741FG- OMB No. 1546-0074 RS Us Only-Do ot wta or stapio in this spaca For the year Jan 1-Dec. 31, 2016, ar other tax year beginning Your firt name and initial separate instr If a joirt return, spouse's first nane and initial Home address (number and street). F you have a P.O.box, see instructions. Make sure the SSNE) above and on line &o are comrect dt town or post office, state, and ZIP code If you have a foreign addrens, also compiete spaces below [pee instructione Check hereil you, or your spouse il lng iny, wart $3 to go to this fund. Checkig box below wnot change your tx o oreign provnce Filing Status1 Single Check only one3 Marmied fling separately. Enter spouse's SSN above 4 囗Head of household (with qualifying peol (See nstructions) Married fling jointly (even if only one had income) the qualifying person is a child but not your dependent, enter this child's name hore. and full name here. 5 Qualitying widowjer) with dependent child Exemptions Boxes checked on 6a and 6b No. of children 6a Yourself. If someone can claim you as a dependent, do not check box 6a 2) Dependents -_ ad not live with Penny Kyle If more thanfour W instructions and check here antared abovo1 Add numbers on 5 lines above d Total number of exemptions claimecd 7 Wages, salaries, tips, etc. Attach Forms) w-2 8a Taxable interest. Attach Schedule B if required Income b Tax-exempt interest. Do not include on line 8a Attach Forms g W-2 here. Also9a Ordinary dividends. Attach Schedule B f required 9a b Qualified dividends 0 Taxable refunds, credits, or offsets of state and local income taxes 11 Alimony received 12 Business income or (loss) Attach Schedule C or C-EZ 13 Capital gain or (loss). Attach Schedule Difreuned. If not requred, check here > 14 Other gains or (osses). Attach Form 4797 15a 16a Pensions and annuities 16a 7 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E17 18 Farm income or (oss. Attach Schedule F 19 20a Social security benefits 20a 21 Other income. List type and amount 22 Combine the amounts in the far nght column for ines 7 attach Forms W-2G and 1099-R if tax was withheld.1 ロ 13 If you did not get a W-2, see instructions. IRA distributions b Taxable amount b Taable amount b Tarable amount 20b 21. This is your total income22 600 Adjusted 24 《aross Certain business expenses df rervists, pertoming artists, and fee-basis govemment officials. Attach Form 2108 or 2106-EZ 24 25 Income 25 Health 26 Moving expenses. Atach Form 3903 27 Deductble part of sell-employment tax. Attach Schedule SE27 28 Self-employed SEP, SIMPLE, and qualified plans 29 Self-employed health insurance deduction 30 Penalty on early withdrawal of savings 31a Alimony paid b Recipient's SSN 32 IRA deduction 33 Student loan interest deduction 34 Tuition and fees. Attach Fom 8917 35 Domestic production activises deduction. Atach Form 8903 5 36 Add ines 23 through 35 37 Subtract ine 36 from line 22. This is your adjusted gross income savings account deduction. Attach Form 8889 36 98.100 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cd. № 1120 Form 1040 poe) 8.50 x 11.00 in

f1040--2016.pdf - Adobe Acrobat Pro DC File Edit View Window Help Home Tools 1040gi. 104saf1040-20... x Sign In +) 57.3% 38 Amount from line 37 (adjusted gross income) 39a Check You were born before January 2, 1952, Bind. Total boxes 38 if Spouse was born before January 2, 1952 Blind. checked 39a b If your spouse temizes on a separate retum or you were a dual-status alien, check here 39 40 Itemized deductions (rom Schedule A or your standard deduction (see left margin) ion 41 Subtract line 40 from line 38 People who 42 Exemptions. If ine 38 is $155,850 ar less, muliply $4,050 by the number on line &d. Otherwise, see instuctions 42 x arye 43 Taxable income. Subtract line 42 from line 41. If ine 42 is more than line 41, enter-o whoornbor | 44 Tax(see istuctions). Checkifanyfrom: a Formfs) 8814 bDFom 4972 c[ ] claimed as a 45 Alternative minimum tax (see instructions). Attach Form 6251.. sepnnt4Excess advance premium tax credit repayment. Attach Form 8962 nstructions. 47 Add lines 44, 45, and 48 60 r48 Foreign tax credit. Attach Form 1118 if required ing 49 Credit for chid and dependent care expenses. Attach Form 244149 o Education credits from Form 8863, line 19 Marred ning 1 Retirement savings contributions credit. Attach Form 8880 52 Child tax credit. Attach Schedule 8812, if required energy credits. Attach Form 5695 waot | 54 Othercredts from Form: a 3800 b 8801 c ouseniold55 Add lines 48 through 54. These are your total credits 56 Subtract line 55 from line 47. If line 55 is more than line 47, enter-0 57 Sef-employment tax. Attach Schedule SE Other 8 Unreported social security and Medicare tax from Form:a4137 8919 59 Addtional tax on IRAs, other qualifted retirement plans, etc. Attach Form 5329 If required 60a Househoid employment taxes from Schedule H b First-time homebuyer credit repayment. Attach Form 5405 If required 61 Heath care Individual responsibity (see Instructions Full year ooverage 62 Taxes from a□Form 8969 b Form 8960 constructions; enter code(s) 63 Add ines 56 through 82. This is your total tax Payments 64 Federal income tax withheld from Forms W-2 and 1099 65 2016 estimated tax payments and amount applied from 2015 return 65 b Nontaxable combat pay election 66b Scheaule EIC 67 Additional child tax credit. Attach Schedule 8812 68 American opportunity credit from Form 8863, line 8 69 Net premium tax credit. Attach Form 8962 70 Amount paid with request for extension to file 71 Excess social security and tier 1 RRTA tax wtthheld 72 Credit for federal tax on fuels. Attach Form 4136 4 Add lnes 64, 85, 66a, and 67 through 73. These are your total payments 8,300 Refund 75 If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid 75 Direct depoeit?b Routing number Amount 78 Amount you owe. Subtract ine 74 from line 63. Far details on how to pay, see instructions78 76a Amount of line 75 you want refunded to you. If Form 8888 is attached, check here76a 17 Amount of line 75 you want applied to your 2017 estimated tax77 You Owe 79 Estimated tax penalty (see instructions Third Party Do you want to alow another person to discuss this return with the RS see instructions)? Yes. Complete below. No Undar panaltios of parjury.I daclare that have aaminad this ratum and acoompanying schodulas and statamunts and to the bast of my knowladgo and balid hay ara trua, comact, and acourataly list all amounts and souroas of income l racavad during the tax your. Dadiaration of praparar jothar than topayarl is basad on all informaion of which preparor has any knowladg Your Keep a copy forSpouse's signature. If a joint return, both must sign. Dte the IRS sent you an ldentity Proteation Date Fom 8.50 x 11.00 in