Individual Tax Accounting and Planning
Tax Return #2 Fact Pattern Name:
Please complete the federal income tax return for Magdalena Schmitz for the tax year 2019. Please complete Form 1040 in its entirety (down to the amount owed or the amount to be refunded) and Schedule A. Please complete a handwritten Schedule D, with the remainder of the supporting calculations. You do not need to complete a formal Schedule D. Please show all calculations on a separate piece of paper and document the calculation of the tax liability in the space immediately below these instructions (in the space, where indicated); you must use this box to show your calculation of the tax liability or you will not earn credit on this portion of the assignment.
Please order the pages of your submission in the following order:
1. This page
2. The Fact Pattern page
3. Form 1040 page 1
4. Form 1040 page 2
5. Schedules 1, 2 and 3, where applicable
6. Schedule A
7. Pages with supporting calculations with reference to the related item being calculated. Calculations without reference will not receive partial credit.
Show the calculation of your Tax Liability here:
Magdalena Schmitz has undergone some major changes in her life recently. In 2016, at the age of 46, her husband, Roger, passed away. Magdalena has not rema
ied as of the end of 2018. Magdalena cu
ently lives on a naval air base as a naval officer. She was living in Pittsburgh when her husband passed away, but she moved back to her childhood home so she could get help from her family raising her children. Magdalena has three children (ages as of the end of the year): Alyssa (23), Tyler (16), and Connor (11).
Magdalena reported the following information:
· Magdalena’s social security number is XXXXXXXXXX
· Alyssa’s social security number is XXXXXXXXXX
· Tyler’s social security number is XXXXXXXXXX
· Connor’s social security number is XXXXXXXXXX
Alyssa is unma
ied and a full-time graduate student at Pennsylvania State University (PSU) (EIN XXXXXXXXXXPSU’s address is 1250 Happy Valley, State College, PA XXXXXXXXXXShe received her bachelor’s degree the year her father passed away, XXXXXXXXXXAlyssa works part-time in State College to help with some of her living expenses and started graduate school. Alyssa earned $2,300 in gross income during the year and had her income tax return prepared on campus by Volunteer Income Tax Assistance (VITA) volunteers. Magdalena provided support for Alyssa including paying for rent, books, tuition, food, clothes, medicine, and other support items. In total, Magdalena provided $12,700 of support for the year. PSU provided Alyssa with a Form 1098-T at year end.
Alyssa’s higher education expenses for her university studies were as follows:
In order to permit Magdalena to maintain a full-time job, she sends Connor to a day care program after school five days a week. During the year, Magdalena paid the day care operator $4,250 for Connor’s care.
ed the following moving-related expenses during the year:
Transport of household items $3,200
Meals in transit XXXXXXXXXX
House hunting trip 1,350
In addition, she drove her car the 400 miles to the naval base as part of the move.
Magdalena’s W-2s for the year reported the following:
Federal Income Tax Withholding
State Income Tax Withholding
Magdalena’s employer withheld all applicable and appropriate payroll taxes. The entire Schmitz family was covered by minimum essential health insurance during each month in XXXXXXXXXXThe insurance was provided by Magdalena’s employers.
Magdalena also received the following during the year:
Life Insurance Payment-Mutual Life (Mother’s passing) $150,000
Cash gift from her father $ 5,000
Interest income-First Bank of Bedford $ XXXXXXXXXX
Interest income-General Electric Bond $ 3,200
Interest income from U.S. Treasury Bond $ XXXXXXXXXX
Interest income-Bedford School District Municipal Bond $ 2,500
Interest income-Johnstown Rural Improvement District Bond $ 1,300 (municipal interest income)
Qualified dividend income from A
ott Labs $275
Qualified dividend income from 3M $350
Dividend income (not qualified) from China Fund $2,000
PA state income tax refund* $ XXXXXXXXXX
*Refund was from state tax she paid last year. Magdalena deducted all of her state taxes as itemized deductions, and received full tax benefit for the deductions, on her prior year federal tax return.
Magdalena paid or incu
ed the following expenses during the year:
Dentist (unreimbursed by insurance) $6,500
Doctors (unreimbursed by insurance) $4,475
Prescriptions (unreimbursed by insurance) $ 255
Real property taxes on residence $7,950
Mortgage interest on principal residence (Form 1098 received) $9,845
Contribution of stock to the American Lung Association $ 600 Basis; FMV at date of donation $800. Long-term
Contribution of land to the Habitat for Humanity $10,000 Basis; FMV $15,000. Short-term
Magdalena had the following activity in their
okerage account during the year (all transactions were reported on a Form 1099-B. Basis information on each stock sale was reported to the IRS):
Sold 2,000 shares of Microsoft 7/1/18 $22,500
Sold 75 shares of Apple, Inc. 4/15/18 $28,750
Sold 350 shares of Cooper Tire 10/14/18 $14,700
Sold 1,000 shares of Cardinal Health 11/10/18 $3,500
Relevant tax basis/holding period information related to sales of securities in the cu
Purchased 2,000 shares of Microsoft on 8/1/17 for $21,000
Purchased 200 shares of Apple, Inc. on 3/8/14 for $40,000
Purchased 350 shares of Cooper Tire on 1/12/13 for $9,000
Received 1,000 shares of Cardinal Health from Magdalena’s father as a gift on 10/10/00. Her father’s basis in the stock at the time of the gift was $7,000. Fair market value of the stock at the date of the gift was $5,000
Magdalena has a $3,000 long-term capital loss ca
yover from the prior tax year.