Note: This problem is for the 2020 tax year.
Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Bill lives with Ashley, and she fully supports him. Bill spent 2020 traveling in Europe and was not a college student. He had gross income of $4,655 in 2020.
Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2020, and many of her expenses were not reimbursed by her health insurance.
Ashley owns Panda Enterprises LLC (98-7654321), a data processing service that she reports as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2020 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses (before the 50% reduction) of $22,000, and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year.
Ashley has an extensive stock portfolio and has prepared the following analysis:
Stock
|
Number of Shares
|
Date Purchased
|
Date Sold
|
Per-Share Cost
|
Per-Share Selling Price
|
Total Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beige |
|
10 |
|
10/18/2019 |
10/11/2020 |
|
$80 |
|
|
$74 |
|
|
$30 |
|
Garland |
|
30 |
|
10/11/2013 |
10/11/2020 |
|
43 |
|
|
157 |
|
|
70 |
|
Peach |
|
15 |
|
3/10/2020 |
8/11/2020 |
|
62 |
|
|
33 |
|
|
45 |
|
Note: Ashley received a Form 1099–B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2020, and these are both ordinary dividends and qualified dividends.
Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband (divorce finalized in June 2017). His Social Security number is 123-45-6788.
Ashley itemizes her deductions and provides the following information, which may be relevant to her return:
Item
|
Amount
|
|
Comment
|
Unreimbursed medical expenses for Ashley |
$9,748 |
|
Does not include health insurance premiums. |
State income taxes paid |
1,830 |
|
|
Real property taxes on personal residence |
3,230 |
|
|
Interest paid on home mortgage (Form 1098) |
8,137 |
|
The loan is secured by the residence and was incurred when the home was purchased. |
Charitable contributions |
1,399 |
|
$940 cash payments to Ashley’s church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expenditures. |
Sales taxes |
619 |
|
Amount per sales tax table. |
Ashley paid $27,000 in estimated Federal income taxes, did not engage in any virtual currency transactions during the year, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2021 taxes. Ashley received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.
Compute Ashley's net tax payable or refund due for 2020. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 2, 3, A, C, D, and SE, Form 8949 and the Qualified Dividends and Capital Gain Tax Worksheet. Ashley qualifies for the § 199A deduction for qualified business income.
- Make realistic assumptions about any missing data.
- If an amount box does not require an entry or the answer is zero, enter "0".
- Enter all amounts as positive numbers, unless otherwise instructed.
- It may be necessary to complete the tax schedules before completing Form 1040.
- When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
- Use the Tax Rate Schedule provided. Do not use the Tax Tables.
Extracted text: 2020 Tax Rate Schedules Single-Schedule X Head of household-Schedule z If taxable income is: of the If taxable income is: But not amount But not Over- over- The tax is: over- Over- over- The tax is: $0 $ 9,875 $0 $ 0 $ 14,100 10% 10% .... ..... 9,875 40,125 $ 987.50 + 12% 9,875 14,100 53,700 $ 1,410.00 + 12% 40,125 85,525 4,617.50 + 22% 40,125 53,700 85,500 6,162.00 + 22% 85,525 163,300 14,605.50 + 24% 85,525 85,500 163,300 13,158.00 + 24% 163,300 207,350 33,271.50 + 32% 163,300 163,300 207,350 31,830.00 + 32% 207,350 518,400 47,367.50 + 35% 207,350 207,350 518,400 45,926.00 + 35% 518,400 156,235.00 + 37% 518,400 518,400 154,793.50 + 37% Married filing jointly or Qualifying widow(er)-Schedule Y-1 Married filing separately-Schedule Y-2 If taxable income is: Over- of the If taxable income is: But not amount But not over- The tax is: over- Over- over- The tax is: $ 0 $ 19,750 $ 0 $ 0 $ 9,875 10% 10% .... .. .... .. 19,750 80,250 $ 1,975.00 + 12% 19,750 9,875 40,125 $ 987.50 + 12% 80,250 171,050 9,235.00 + 22% 80,250 40,125 85,525 4,617.50 + 22% 171,050 326,600 29,211.00 + 24% 171,050 85,525 163,300 14,605.50 + 24% 326,600 414,700 66,543.00 + 32% 326,600 163,300 207,350 33,271.50 + 32% 414,700 622,050 94,735.00 + 35% 414,700 207,350 311,025 47,367.50 + 35% 622,050 167,307.50 + 37% 622,050 311,025 83,653.75 + 37% .... .... ..