Question;INDIVIDUAL TAX RETURN;PROBLEM 6;Required;?;Use the following information to complete Paige Turner's 2011;federal income tax return. If information is missing, use reasonable;assumptions to fill in the gaps.;?;Any required forms, schedules, and instructions can be found at;the IRS Web site (). The instructions;can be helpful in completing the forms.;Facts;1. Paige Turner is single;and has two children from her previous marriage. Ali lives with Paige, and;Paige provides more than half of her support. Leif lives with his father, Will;(Lief lived with Will for all of 2011). Will provides more than half of Leif's;support. Paige pays ?alimony? of $400 per month to Will. The payments are to;continue until Leif reaches age 18, when they will be reduced to $150. Paige;provides you with the following additional information;?;She uses the cash method of accounting and a calendar year for;reporting.;?;She wishes to contribute to the presidential election campaign.;?;Paige lives at 523 Essex Street, Bangor, ME 04401.;Page C-10;?;Paige's birthday is May 31, 1973.;?;Ali's birthday is October 5, 2002.;?;Leif's birthday is December 1, 2000.;?;Paige's Social Security number is 007-16-4727.;?;Ali's Social Security number is 005-61-7232.;?;Leif's Social Security number is 004-23-3419.;?;Will's Social Security number is 006-45-6333.;?;She does not have any foreign bank accounts or trusts.;2. Paige is employed as a;nuclear engineer with Atom Systems Consultants, Inc. (ASCI). ASCI's federal;employer identification number is 79-1234466. Her annual salary is $70,000.;ASCI has an extensive fringe benefits program for its employees. Paige's pay;stubs indicate that she had $7,230 withheld in federal taxes, $4,987 in state;taxes, $4,495 in Social Security taxes, and $1,051 in Medicare taxes.;3. Paige received salary;of $70,000 (before subtracting her 401(k) and flexible spending plan;contributions). She contributed $7,000 to her 401(k) account, and she;contributed $3,600 to her flexible spending account.;4. ASCI paid $397 of;whole life insurance premiums to cover Paige's personal whole life insurance;policy. ASCI also paid health club dues of $900 to a nearby health club on;Paige's behalf.;5. Taking advantage of;ASCI's educational assistance program, during the fall Paige enrolled in two;graduate engineering classes at a local college. ASCI paid her tuition, fees;and other course-related costs of $2,300.;6. Paige received free;parking in the company's security garage that would normally cost $200 per;month.;7. Paige manages the;safety program for ASCI. In recognition of her superior handling of three;potential crises during the year, Paige was awarded the Employee Safety Award;on December 15. The cash award was #x0024,500.;8. On January 15, 2011;Paige's father died. From her father's estate, she received stock valued at;$30,000 (his basis was $12,000) and her father's house valued at $90,000 (his;basis in the house was $55,000).;9. Paige owns several;other investments and in February 2012 received a statement from her brokerage;firm reporting the interest and dividends earned on the investments for 2011.;(See Exhibit A.);10. In addition to the;investments discussed above, Paige owns 1,000 shares of Grubstake Mining;Development common stock. Grubstake is organized as an S corporation and has;100,000 shares outstanding (S corp. ID number 45-4567890). Grubstake reported;taxable income of $200,000 and paid a distribution of $1.00 per share during;the current year. Paige tells you that Grubstake typically does not send out;its K-1 reports until late April. However, its preliminary report has been;consistent with the K-1 for many years. (See Exhibit A.) Paige does not;materially participate in Grubstake's activities.;11. Paige slipped on a wet;spot in front of a computer store last July. She broke her ankle and was unable;to work for two weeks. She incurred $1,300 in medical costs, all of which were;paid by the owner of the store. The store also gave her $1,000 for pain and;suffering resulting from the injury. ASCI continued to pay her salary during;the two weeks she missed because of the accident. ASCI's plan also paid her;$1,200 in disability pay for the time she was unable to work. Under this plan;ASCI pays the premiums for the disability insurance as a taxable fringe;benefit.;EXHIBIT A;Forms 1099 and 1098;Page C-11;12. Paige received a Form;1099-B from her broker for the sale of the following securities during 2011.;The adjusted basis amounts were reported to the IRS.;Security;Sale Date;Purchase Date;Sales Price;Commission Paid on Sale;Her Basis;Nebraska state bonds;03/14/11;10/22/06;$2,300;$160;$1,890;Cassill Corp (500 shares);10/20/11;02/19/11;$8,500;$425;$9,760;13. In addition to the;taxes withheld from her salary, she also made timely estimated federal tax;payments of $175 per quarter and timely estimated state income tax payments of;$150 for the first three quarters. The $150 fourth-quarter state payment was;made on December 28, 2011. Paige would like to receive a refund for any;overpayment.;14. Because of her busy;work schedule, Paige was unable to provide her accountant with the tax;documents necessary for filing her 2010 state and federal income tax returns by;the due date (April 18, 2011). In filing her extension on April 18, 2011, she;made a federal tax payment of $750. Her return was eventually filed on June 25;2011. In August 2011, she received a federal refund of $180 and a state tax;refund of $60. Her itemized deductions for 2010 were $12,430.;15. Paige found a renter;for her father's house on August 1. The monthly rent is $400, and the lease;agreement is for one year. The lease requires the tenant to pay the first and;last months' rent and a $400 security deposit. The security deposit is to be;returned at the end of the lease if the property is in good condition. On;August 1, Paige received $1,200 from the tenant per the terms of the lease;agreement. In November, the plumbing froze and several pipes burst. The tenant;had the repairs made and paid the $300 bill. In December, he reduced his rental;payment to $100 to compensate for the plumbing repairs. Paige provides you with;the following additional information for the rental in 2011.;Property taxes;$770;Other maintenance expenses;285;Insurance expense;495;Management fee;350;Depreciation (to be computed);?;Page C-12;The rental property is located at 35 Harvest;Street, Orono, ME 04473. Local practice is to allocate 12 percent of the fair;market value of the property to the land. (See #8.) Paige makes all;decisions with respect to the property.;16. Paige paid $2,050 in;real estate taxes on her principal residence. The real estate tax is used to;pay for town schools and other municipal services.;17. Paige drives a 2010;Acura TL. Her car registration fee (based on the car year) is $50 and covers;the period 1/1/11 through 12/31/11. In addition, she paid $280 in property tax;to the state based on the book value of the car.;18. In addition to the;medical costs presented in #11, Paige incurred the following unreimbursed;medical costs;Dentist;$?310;Doctor;390;Prescription drugs;215;Over-the-counter drugs;140;Optometrist;125;Emergency room charges;440;LASIK eye surgery;2,000;Chiropractor;265;19. On March 1, Paige took;advantage of low interest rates and refinanced her $75,000 home mortgage with;her original lender. The new home loan is for 15 years. She paid $215 in;closing costs and $1,500 in discount points (prepaid interest) to obtain the;loan. The house is worth $155,000, and Paige's basis in the house is $90,000.;As part of the refinancing arrangement, she also obtained a $10,000 home-equity;loan. She used the proceeds from the home-equity loan to reduce the balance due;on her credit cards. Paige received several Form 1098 statements from her bank;for interest paid by her in 2011. Details appear below. (See also Exhibit;A on page C-11.);Primary home mortgage;$7,100;Home-equity loan;435;Credit cards;498;Car loan;390;20. On May 14, 2011, Paige;contributed clothing to the Salvation Army. The original cost of the clothing;was $740. She has substantiation valuing the donation at $360. The Salvation;Army is located at 350 Stone Ridge Road, Bangor, ME 04401. In addition, she;made the following cash contributions and received a statement from each of the;following organizations acknowledging her contribution;Larkin College;$850;United Way;125;First Methodist Church;790;Amos House (homeless shelter);200;Local Chamber of Commerce;100;Page C-13;21. On April 1, 2011;Paige's house was robbed. She apparently interrupted the burglar because all;that's missing is an antique brooch she inherited from her grandmother (June;12, 2004) and $300 in cash. Unfortunately, she didn't have a separate rider on;her insurance policy covering the jewelry. Therefore, the insurance company;reimbursed her only $500 for the brooch. Her basis in the brooch was $6,000;and its fair market value was $7,500. Her insurance policy also limits to $100;the amount of cash that can be claimed in a theft.;22. Paige sells real;estate in the evening and on weekends. She runs her business from a rental;office she shares with several other realtors (692 River Road Bangor, ME;04401). The name of her business is Turner Real Estate and the federal identification;number is 05-8799561. Her business code is 531210. Paige has been operating in;a business-like way since 2001 and has always shown a profit. She had the;following income and expenses from her business;Commissions earned;$21,250;Expenses;Advertising;2,200;Telephone;95;Real estate license;130;Rent;6,000;Utilities;600;23. She has used her Acura;TL in her business since July 1, 2011. During 2011, she properly documented;6,000 business miles (1,000 miles each month). The total mileage on her car;(i.e., business- and personal-use miles) during the year was 15,000 miles;(including 200 miles commuting to and from the real estate office). In 2011;Paige elects to use the standard mileage method to calculate her car expenses.;She spent $45 on tolls and $135 on parking related to the real estate business.;24. Paige's company has an;accountable expense reimbursement plan for employees from which Paige receives;$12,000 for the following expenses;Airfare;$4,700;Hotel;3,400;Meals;2,000;Car rentals;600;Entertainment;900;Incidentals;400;25. During 2011, Paige;also paid $295 for business publications other than those paid for by her;employer and $325 for a local CPA to prepare her 2010 tax return.
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