Question

Advanced Scenario 5: Fran EmersonDirections

Using the tax software, complete the tax return, including Form 1040 and all appropri- ate forms, schedules, or worksheets . Answer the questions following the scenario .

Note: When entering Social Security numbers (SSNs) or Employer IdentificationNumbers (EINs), replace the Xs as directed, or with any four digits of your choice.

Interview Notes

• Fran’s husband died in March 2017. Fran filed a joint return with her husband for2017 . She has not remarried .

• Fran provided the entire cost of maintaining the household and all the support for her children, Meredith and Oliver, in 2018 .

• Fran’s older brother, Howard, lives with her and is permanently and totally disabled . He received disability income which he used to provide more than half of his own support .

• Oliver attended day care while Fran worked .

• In September 2018, Fran’s daughter, Meredith, enrolled in college to pursue a bach- elor’s degree . She had no previous post-secondary education . Yuma College is aqualified educational institution.

• Meredith does not have a felony drug conviction .

• Fran brought a Form 1098-T and an account statement from the college . Meredith’s purchases at the college bookstore were for course-related books .

• The terms of Meredith’s scholarship require that it be used to pay for tuition .

• Fran took a distribution from her IRA and used all of the distribution to pay for some of Meredith’s education expenses . All her IRA contributions were deductible in the year she made them .

• Fran received a Form 1099-C for cancelled credit card debt . Using the insolvency determination worksheet in Publication 4012, you helped Fran determine the value of her assets exceeded her liabilities and that she was solvent at the time the credit card debt was cancelled .

• Fran did not have minimum essential healthcare coverage (MEC) all year and does not qualify for any exemption . Meredith, Oliver, and Howard each had MEC all year

10 . Head of Household is Fran’s most advantageous filing status.a . True b . False

11 . How many qualifying persons does Fran have for the earned income credit? a . 0 b . 1 c . 2 d . 3

12 . What is the amount of the child and dependent care credit Fran can claim on Form 2441, Child and Dependent Care Expenses? $________ .

13 . The total amount of qualified educational expenses used in the calculation of Fran’s2018 American opportunity credit is:

a . $3,300 b . $3,825 c . $4,000 d . $4,220

14 . What is the amount of Fran’s individual shared responsibility payment? $________ .

15 . What is the amount of Fran’s federal withholding? $________ .

16 . Fran’s cancelled debt from Form 1099-C, Cancellation of Debt, must be included on her federal income tax return as other income .

a . True b . False

17 . Fran can use the higher education expenses exception to avoid the 10% addi- tional tax on the early distribution from her IRA on Form 5329, Additional Taxes onQualified Plans (including IRAs) and Other Tax-Favored Accounts.

a . True b . False

Answer 1

10.A.FALSE                                                                                                                                     11.C.2                                                                                                                                             13.A                                                                                                                                                  14.0                                                                                                                                               15.2250                                                                                                                                           16.A.TRUE                                                                                                                                        17.A.TRUE