Tax Return

Student’s Name

Course Name

Instructor’s Name

April 12, 2020

Decisions and Assumptions:

1. The child tax credit of $2,000 per qualifying child under age 17. $1,400 can be refunded for each qualifying child. Amount reduce or phase out at an adjusted gross income of $400,000. Max is ten years old and hence qualify for a child tax credit.
2. The child must be 24 years or less if a full-time student for his/her income to be included in the tax return. He/she should not provide more than 50% of the support. Amanda is 20 years, a full-time student, and has contributed less than 50% of the support.
3. Income:

Form 1040 Line 1

4. Interest income and qualified dividend income for Amanda are recorded in Form 1040 Schedule B part 1 and part 2, respectively.
5. Palmview bar association award is not included in the tax return because an unrelated party paid it as a contribution towards education.
6. Jorge and Margarita provide more than 50% of Amanda support, which includes paying for undergraduate study and law school. The total support amount is 11,000 tuition and 9,000 accommodation.
7. Max attends St Mary’s Parochial School for ten months and pays a tuition fee of $400 per month because the parent donated a minimum of $2,000 to St Mary’s Church.
8. Federal Income Tax withheld is $18,500 (Form 1040 line 17)
9. Margarita operates a business, and hence the return is filed under form 1040 Schedule C. Gross profit is $91,750, Line 6.

Deprecation (6,098) line 13

This is the total depreciation of the property.  The depreciation of the computers and sewing machines are according to 5 years MACRS.

10. When Margarita’s great aunt Consuelo died, the received money of $100,000 is recorded in form 1040 Schedule 1 as other incomes (line 8) because neither Jorge nor Margarita paid any of the premiums.
11. The collection of antique fans is valued at the FMV as at the death, and hence the gain is 800 (10,800 – 10,000). It is a short-term gain in Schedule D line 1a.

Calculation of the short-term gains (Schedule D part 1)

Calculation of long term-gain (Schedule D part 2)

12. When Jorge plaid drums he earned a total revenue of $1,750 (1,600 + 150) and a total expense of 3,450 (1,500+ 1,000 + 400 + 200 +350). The even resulted in a loss of -1700. The expense is in Schedule 1 part 11 line 11.
13. Lopez’s purchased a 2-bedroom apartment and rented it for 75 days (Form 1040 Schedule E). The rent received is 16,400, and the expenses for the apartment is $17,875. This activity resulted in a loss of $1,475 and cannot be deducted because it is a passive loss property.
14. Taxable Income (Form 1040 line 12.a)

15. Lopez’s have to pay a total of 27,142 for the 2019 tax. (Form 1040 line 23)