Robert A. Kliesh, age 41, is single and has no dependents. Robert’s Social Security number is 111–11–1111. His address is 201 Front Street, Missoula, MT XXXXXXXXXXHe is independently wealthy as a result of having inherited sizable holdings in real estate and corporate stocks and bonds. Robert is a minister at First Presbyterian Church, but he accepts no salary from the church. However, he does reside in the church’s parsonage free of charge. The fair rental value of the parsonage is $3,000 a month. The church also provides him with a cash grocery allowance of $200 a week. Examination of Robert’s financial records provides the following information for 2011.
a. On January 16, 2011, Robert sold 1,000 shares of stock for a gain of $10,000. The stock was acquired 14 months ago.
b. He received $30,000 of interest on private activity bonds that he had purchased in 2007. He also received $40,000 of interest on tax-exempt bonds that are not private activity bonds.
c. He received gross rent income of $190,000 from an apartment complex he owns. He qualifies as an active participant.
d. Expenses related to the apartment complex, which he acquired in 1987, were $225,000.
e. Robert’s interest income (on CDs) totaled $23,000. Robert invests only in growth stocks, so he earns no dividend income.
f. He won $60,000 on the lottery.
g. On October 9, 2009, Robert exercised his rights under Falcon Corporation’s incentive stock option plan. For an option price of $20,000, he acquired stock worth $75,000. The stock became freely transferable in 2011. At the date the stocks became freely transferable, the fair market value was $95,000.
h. Robert was the beneficiary of an $800,000 life insurance policy on his Uncle Jake. He received the proceeds in October.
i. Robert had the following potential itemized deductions from AGI.
• $5,200 fair market value of stock contributed to Presbyterian Church (basis of
stock was $3,000). He had owned the stock for two years.
• $4,200 interest on consumer purchases.
• $3,900 state and local income tax.
• $6,500 medical expenses (before 7.5% floor) for himself. He also paid $15,000 of medical expenses for a parishioner who died.
• $300 for a safe deposit box that is used to store investments and related legal documents.
• $750 contribution to the campaign of the Democratic candidate for governor.
• $5,000 paid for lottery tickets associated with playing the state lottery. Robert contributed $5,000 of his net winnings to the church.
• $5,000 contribution to his traditional IRA.
• Robert lives in Montana, so he paid no sales tax.
Use Forms 1040 and 6251 and Schedules A, B, D, and E to compute Robert Kliesh’s 2011 Federal income tax liability (including AMT, if any). Suggested software: H&R BLOCK At Home.