Question: Alice J. and Bruce M. Byrd are
Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6784 and 111-11-1113, respectively. Alice’s birthday is September 21, 1973, and Bruce’s is June 27, 1972. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (Employer Identification Number 98-7654321). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (Employer Identification Number 11-1111111). The following information is shown on their Wage and Tax Statements (Form W–2) for 2020. 
The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1996, Social Security number 123-45-6788) and John (born February 7, 2000, Social Security number 123-45-6780). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $6,200 from a summer internship in 2020, and John earned $3,800 from a part-time job. Both children received scholarships covering tuition and materials. During 2020, the Byrds provided 60% of the total support of Bruce’s widower father, Sam Byrd (born March 6, 1944, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $1,600,000 on December 28. The Byrds had the following expenses relating to their personal residence during 2020: Property taxes …………………………………………………………………………………………….$5,000 Qualified interest on home mortgage (acquisition indebtedness) ……………………….8,700 Repairs to roof ……………………………………………………………………………………………….5,750 Utilities …………………………………………………………………………………………………………4,100 Fire and theft insurance ………………………………………………………………………………….1,900 The Byrds had the following medical expenses for 2020: Medical insurance premiums ……………………………………………………………………….$4,500 Doctor bill for Sam incurred in 2019 and not paid until 2020 …………………………….7,600 Operation for Sam ………………………………………………………………………………………….8,500 Prescription medicines for Sam ………………………………………………………………………….900 Hospital expenses for Sam ………………………………………………………………………………3,500 Reimbursement from insurance company, received in 2020 ………………………………3,600 The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father’s support. Other relevant information follows: • When they filed their 2019 state return in 2020, the Byrds paid additional state income tax of $900. • During 2020, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50. • The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition. • Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65). • In 2020, the Byrds received interest income of $2,750, which was reported on a Form 1099–INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322). • The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2020) was taken out by the Byrds on May 1, 2016. • Alice’s employer requires that all employees wear uniforms to work. During 2020, Alice spent $850 on new uniforms and $566 on laundry charges. • Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association. • Neither Alice’s nor Bruce’s employer reimburses for employee expenses. • The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax. • This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs. • Alice and Bruce paid no estimated Federal income tax, and they did not engage in any virtual currency transactions during the year. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund. The Byrds received the appropriate recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored. Part 1—Tax Computation Compute net tax payable or refund due for Alice and Bruce Byrd for 2020, and complete their 2020 Federal tax return using appropriate forms and schedules. If they have overpaid, they want the amount to be refunded to them. Suggested software: ProConnect Tax. Part 2—Tax Planning Alice and Bruce are planning some significant changes for 2021. They have provided you with the following information and asked you to project their taxable income and tax liability for 2021. The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for living expenses during 2021. They expect to earn total interest of $32,000 on the CDs. Bruce has been promoted to regional manager, and his salary for 2021 will be $88,000. He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $5,456. Alice, who has been diagnosed with a serious illness, will take a leave of absence from work during 2021, so she will not receive a salary or incur any work-related expenses during the year. The estimated cost for her medical treatment is $15,400, of which $6,400 will be reimbursed by their insurance company in 2021. Their medical insurance premiums will increase to $9,769. Property taxes on their residence are expected to increase to $5,100. The Byrds’ home mortgage interest expense and charitable contributions are expected to be unchanged from 2020. John will graduate from college in December 2020 and will take a job in New York City in January 2021. His starting salary will be $46,000. Assume that all of the information reported in 2020 will be the same in 2021 unless other information has been presented above.
> On July 16, 2021, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2021 for the
> Lee owns land and a building (held for investment) with an adjusted basis of $75,000 and a fair market value of $250,000. The property is subject to a mortgage of $400,000. Because Lee is in arrears on the mortgage payments, the creditor is willing to ac
> Isabelle invests in land, and Grace invests in taxable bonds. The land appreciates by $8,000 each year, and the bonds earn interest of $8,000 each year. After holding the land and bonds for five years, Isabelle and Grace sell them. There is a $40,000 rea
> Comment on the following transactions. a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2021, he sells 100 shares for $3,000. On August 16, 2021, he purchases another 100 shares for $3,400. Explain why Mort’s rea
> Thelma inherited land from Sadie on June 7, 2021. The land appreciated in value by 100% during the six months Sadie owned it. The value has remained stable during the three months Thelma has owned it, and she expects it to continue to do so in the near f
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> Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Peyton is to receive $1,600,000 in cash. The purchaser is to assume Peyton’s mortgage of $950,000 on the property. To enable the
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> On July 1, 2021, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 3%. a. How much interest income and/or interest expense must Katrina report in 2021, assuming that st
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> In 2021, Ivanna, who has three children under age 13, worked full-time while her spouse, Sergio, was attending college for nine months during the year. Ivanna earned $47,000 and incurred $6,400 of child care expenses. Determine Ivanna and Sergio’s child
> In 2021, Santiago and Amy are married and file a joint tax return. They have three dependent children, ages 12, 14, and 19. All parties are U.S. citizens. The couple’s AGI is $140,000. Determine any available child tax credit and dependent tax credit.
> Determine the additional Medicare taxes for these individuals. a. Mario, who is single, earns wages of $440,000. b. George and Shirley are married and file a joint return. During the year, George earns wages of $138,000, and Shirley earns wages of $210,0
> In 2021, Miranda records net earnings from self-employment of $158,500. She has no other income. Determine the amount of Miranda’s self-employment tax and her for AGI income tax deduction.
> Elijah is single. He has a $12,000 AMT credit from 2020. In 2021, his regular tax liability is $28,000 and his tentative minimum tax is $24,000. Does Elijah owe AMT in 2021? How much (if any) of the AMT credit can Elijah use in 2021?
> Yanni, who is single, provides you with the following information for 2021. Salary ……………………………………………………………………………………………..$250,000 State income taxes ………………………………………………………………………………..25,000 Mortgage interest expense on principal residence ($480,000 mortgage
> In 2021, Henri, a U.S. citizen and calendar year taxpayer, reports $30,000 of income from France, which imposes a 10% income tax, and $50,000 from Italy, which imposes a 40% tax. In addition, Henri reports taxable income of $90,000 from within the United
> Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2021. She purchased the stock for $18,100 on December 28, 2020, and it had a fair market value of $27,000 when she made the donation. a. What is Donna’s charitable cont
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> Compute the 2021 AMT exemption for the following taxpayers. a. Bristol, who is single, reports AMTI of $650,000. b. Marley and Naila are married and file a joint tax return. Their AMTI is $1,528,000.
> In March 2021, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2018. Serengeti acquired 5,000 shares of Thunder stock for the exercise price of $65 per share. The fair market value of the stock at the da
> Pierre, a cash basis, unmarried taxpayer, had $1,400 of state income tax withheld during 2021. Also in 2021, Pierre paid $455 that was due when he filed his 2020 state income tax return and made estimated payments of $975 toward his 2021 state income tax
> Jason, a single parent, lives in an apartment with his three minor children, whom he supports. Jason earned $27,400 during 2021 and uses the standard deduction. Calculate the amount, if any, of Jason’s earned income credit.
> This year, Amy purchased a personal residence at a cost of $1,000,000. She borrowed $800,000 secured by the home to make the purchase. This year, she paid interest expense on this mortgage of $12,000. How much may she deduct?
> Green Corporation hires six individuals on January 4, 2021, all of whom qualify for the work opportunity credit. Three of these individuals receive wages of $8,500 during 2021, and each individual works more than 400 hours during the year. The other thre
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> For calendar year 2021, Giana was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2021. How much of these premiums may Giana deduct as a dedu
> Use the following data to calculate Chiara’s AMT base in 2021. Chiara will itemize deductions and will file as a single taxpayer. Taxable income ………………………………………………………….$248,000 Positive AMT adjustments ………………………………………………73,000 Negative AMT adjustments ……
> In 2021, Bianca earned a salary of $164,000 from her employer. Determine the amount of FICA taxes and Medicare taxes withheld from her salary.
> Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2021, for $550,000. Kate pays the real property taxes for the entire year on October 1, 2021. a. How much of the property taxes can be ded
> Rafael and Lucy, married taxpayers, each contribute $2,900 to their respective § 401(k) plans offered through their employers. The AGI reported on the couple’s joint return is $44,000. Determine their credit for retirement plan contributions (the Saver’s
> Paola and Isidora are married; file a joint tax return; report modified AGI of $148,000; and have one dependent child, Dante. The couple paid $12,000 of tuition and $10,000 for room and board for Dante (a freshman). Dante is a full-time student. Determin
> Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2021. Also in 2021, Derek paid $50 that was due when he filed his 2020 state income tax return and made estimated payments of $100 toward his 2021 state income tax liab
> Jesse, an engineer, operates a separate business that he acquired eight years ago. If he participates 85 hours in the business and it incurs a loss of $34,000, under what circumstances can Jesse claim an active loss?
> Samuel and Annamaria are married, file a joint return, and have three qualifying children. In 2021, they earn wages of $34,000 and no other income. Determine the amount of their earned income credit for 2021.
> Alison incurs the following research expenditures. In-house wages …………………………..$60,000 In-house supplies …………………………….5,000 Payment to ABC, Inc., for research …..80,000 a. Determine the amount of qualified research expenditures. b. Assuming that the base a
> During 2021, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the year. Determine the amount of Lincoln’s work opportunit
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> Kathy, a sole proprietor, owns and operates a grocery store. Kathy’s husband and her 16-year-old daughter work in the business and are paid wages. Will the husband and daughter be subject to FICA? Explain.
> The IRS provides a web-based tool to help taxpayers determine whether they are eligible for the earned income tax credit. Locate the EITC Assistant at the IRS website. Then apply the facts related to Walt in Example 21 for either 2020 or 2021. Determine
> Barbara incurred the following expenses during 2021: $840 dues at a health club she joined at the suggestion of her physician to improve her general physical condition, $240 for multiple vitamins and antioxidant vitamins, $3,500 for a smoking cessation p
> Is the earned income credit a form of negative income tax? Why or why not?
> How do U.S. individuals generate their income? Does it vary by size of income (AGI)? Go to the IRS tax statistics website (irs.gov/statistics), and download a recent tax year’s information on “sources of income.” Compare the following types of income by
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> Dan, a self-employed individual taxpayer, prepared his own income tax return for the past year and has asked you to check it for accuracy. Your review indicates that Dan failed to claim certain business meals expenses. Will the correction of this omissio
> Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practi
> Paul and Donna Decker are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2021. The Deckers live at 1121 College Avenue, Carmel, IN 46032. Paul is an assistant manager at Carmel Motor Inn, and Donna is a teacher at Carmel Ele
> John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 7-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony
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> Robert A. Kliesh, age 41, is single and has no dependents. Robert’s Social Security number is 111-11-1115. His address is 727 Big Horn Avenue, Sheridan, WY 82801. He does not contribute to the Presidential Election Campaign fund through the Form 1040. Ro
> Tim and Sarah Lawrence are married and file a joint return. Tim’s Social Security number is 123-45-6789, and Sarah’s Social Security number is 111-11-1111. They reside at 100 Olive Lane, Covington, LA 70434. They have two dependent children, Sean and Deb
> Betty is age 34 and has AGI of $50,000 and regular taxable income of $35,000. The following items may qualify as itemized deductions for Betty: Qualified medical expenses (before percentage of AGI floor) ……………………..$3,000 Real estate tax ……………………………………………
> Betty is age 34 and has AGI of $50,000. The following items may qualify as itemized deductions for Betty: Qualified medical expenses (before 7.5% AGI floor) ………………………….$6,000 Real estate tax ………………………………………………………………………………….1,200 State income tax ……………………
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> On January 25, year 10, Mother Hall gave her daughter, Nadyne, 500 shares of common stock of XYZ, Corp. The fair market value of the stock on January 25 was $2,000. Mother Hall had paid $4,000 for the stock three years earlier. Nadyne decided a month aft
> On February 1 of the current year, Duffy learned that he was bequeathed 1,000 shares of common stock under his father’s will. Duffy’s father had paid $12,500 for the stock 20 years ago. Fair market value of the stock on February 1 of the current year, th
> Madison and Nick Koz have two children, ages 8 and 10. Both children meet the definition of qualifying child. The Koz family has adjusted gross income of $300,000. What is the amount of the child tax credit on the couple’s income tax return? a. $1,000 b.
> Matt, who is single, always has elected to itemize deductions rather than take the standard deduction. In prior years, his itemized deductions always exceeded the standard deduction by a substantial amount. Based on recent tax law changes and the fact th
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> On his 2020 Federal income tax return, Rigved deducted state income taxes of $8,000 for amounts withheld and estimated tax payments made in 2020. When he filed his 2020 state income tax return in April 2021, he discovered that he had overpaid his state i
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> Ruth Ames died on January 10, 2021. In filing the estate tax return, her executor, Melvin Sims, elects the primary valuation date and amount (fair market value on the date of death). On March 12, 2021, Melvin invests $30,000 of cash that Ruth had in her
> Taxpayers who purchase health insurance coverage through the Health Insurance Marketplace may be eligible for the premium tax credit under § 36B. Use the IRS website to determine which taxpayers are eligible for the credit. Send a one-page summary of you
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> During 2021, Susan incurred and paid the following expenses for Beth (her daughter), Ed (her father), and herself: Surgery for Beth ………………………………………………………………..$4,500 Red River Academy charges for Beth: Tuition ………………………………………………………………………………..5,100 Room, b
> Arthur Wesson, an unmarried individual who is age 58, reports taxable income of $510,000 in 2021. He records positive AMT adjustments of $80,000 and preferences of $35,000. Arthur itemizes his deductions, and his regular tax liability in 2021 is $153,044
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> Emma Doyle is employed as a corporate attorney. For calendar year 2021, she had AGI of $75,000 and paid the following medical expenses: Medical insurance premiums ……………………………………………………………….$3,700 Doctor and dentist bills for Bob and April (Emma’s parents)
> Linda, who files as a single taxpayer, had AGI of $280,000 for 2021. She incurred the following expenses and losses during the year: Medical expenses (before the 7.5%-of-AGI limitation) ………………………………..$33,000 State and local income taxes ……………………………………………
> Paola exercised an incentive stock option on March 1, 2021. She acquired 2,000 shares of stock at an exercise price of $3 per share when the fair market value of the stock was $15 per share. However, Paola was concerned that the stock was overvalued, so
> Evan is single and has AGI of $277,300 in 2021. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following: Medical expenses (before the 7.5%-of-AGI limitation) ………………………………..$31,000 Interest on home
> Bart and Elizabeth Forrest are married and have no dependents. They have asked you to advise them whether they should file jointly or separately in 2021. Bart incurred some significant medical expenses during the year related to an unexpected surgery. Th
> Heather wants to invest $40,000 in a relatively safe venture and has discovered two alternatives that would produce the following reportable ordinary income and loss over the next three years: She is interested in the after-tax effects of these alternati
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> Ramon had AGI of $180,000 in 2022. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable charitable contribution deduction in each of the follo
> Liz had AGI of $130,000 in 2021. She donated Bluebird Corporation stock with a basis of $10,000 to a qualified charitable organization on July 5, 2021. a. What is the amount of Liz’s deduction assuming that she purchased the stock on December 3, 2020, an
> In 2021, Geoff incurred $900,000 of mine and exploration expenditures. He elects to deduct the expenditures as quickly as the tax law allows for regular tax purposes. a. How will Geoff’s treatment of mine and exploration expenditures affect his regular t
> In March 2021, Helen Carlon acquired used equipment for her business at a cost of $300,000. The equipment is five-year property for regular tax depreciation purposes. a. If Helen depreciates the equipment using the method that will produce the greatest d
> Nichole, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2021, she files her state income tax return for 2020 and pays an additional $1,000 in state income taxes. During 2021, her withholdings f
> Angela, who is single, incurs circulation expenditures of $270,000 during 2021. She is deciding whether to deduct the entire $270,000 or to capitalize the expenses and deduct them over a three-year period. Angela is in the 37% bracket for regular tax pur
> In 2007, Malik purchased an office building for $500,000 to be used in his business. He sells the building in the current tax year. Explain whether his recognized gain or loss for regular tax purposes will be different from his recognized gain or loss fo
> Jaimee and Mike live in Austin, Texas. They married early in January 2020. They had saved a significant amount of money for their wedding, but instead decided to elope. The couple used the money they had saved for the wedding to buy some vacant, unimprov
> Perform the indicated operation.
> Express each terminating decimal number as a quotient of two integers. If possible, reduce the quotient to lowest terms. 0.2345
