ACC 321- INDIVIDUAL INCOME TAX RETURN CASE- Paige Turner. 1. Paige Turner is single and has 2 children from her previous marriage. Anika, 11, lives with Paige. Julius, 13, lives with his father, Ray. Paige pays alimony of $600 per month to Ray. The payments are to continue until Julius 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.
 Although Ray is Julius’ father, he is willing to allow Paige to take the deduction. (Please include the appropriate form for him to sign and her to include with her return.)
 She wishes to contribute to the presidential election campaign.
 Paige lives at 523 Essex Street, Bangor, Maine (04401).
 Paige’s Social Security number is 007-16-4727.
 Anika’s Social Security number is 005-61-7232.
 Juilus’ Social Security number is 004-23-3419.
 Ray’s Social Security number is 006-45-6333.
 She does not have any foreign bank accounts or trusts.

2. Paige is 39 and employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). Her w-2 is attached.

3. Paige furnishes you with the following description of the fringe benefits she received from ASCI in 2013 that were not included on her w-2:
• Free Parking at the Company’s secured garage
• $50,000 term life insurance policy
• $300 in frequent flier miles which she cashed in to buy a new TV.
• $200 in frequent flier miles which she used to for a plane ticket for vacation
• Hazmat outfit & Geiger counter

4. Paige owns several other investments and in February 2014 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2013 (see Exhibit A).

5. Paige owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding. Grubstake reported ordinary taxable income of $250,000 and $100,000 in Long-Term Capital Gains on its Schedule K. Grubstake paid dividends to its shareholders of $2.00 per share during the current year.

6. Paige was in a store during a robbery in 2012. Although she was uninjured, she sued the store for emotional distress due to the store’s poor security. She settled with the store for $10,000 in merchandise in 2013.

7. Paige received a Form 1099-B from her broker for the sale of the following securities during 2013:
Sale Purchase Sales Commission Her
Security Date Date Price Paid on Sale Basis
Illinois Bonds 03/14/13 10/31/97 $4,000 $160 $ 3,000
Wiggle Corp 01/18/13 02/19/12 $4,500 $425 $ 5,000
FPRT, Inc 06/30/13 02/25/11 $25,000 $700 $ 2,500
****Paige also has $15,000 Long Term capital loss carry-forward from last year.

8. In addition to the taxes withheld from her salary, she also made timely
estimated federal tax payments of $2,000 per quarter and timely estimated state income tax payments of $1,500 for the first three quarters. The $1,000 fourth quarter state payment was made on December 28, 2013. Paige receive a $5,000 refund from the state of Maine in 2013 for an overpayment of 2012’s income taxes and a $1,500 property tax refund in 2013 related to personal residence after she protested her 2012 tax assessment.

9. Paige paid $4,000 for childcare for Anika. The DAYAWAY daycare (123 main, Bangor, Me) has tax ID: FEIN 43-2222222

10. Paige paid $4,200 in real estate taxes on her principal residence in 2013. The real estate tax is used to pay for town schools and other municipal services. Since she paid late, an additional amount of $420 was due. (Total of $4,620.) She also paid $1,500 in real-estate taxes on a condo she owns in Florida and $1,800 in real-estate taxes on some ground that she plans to build a house on.

11. Paige drives a 2004 Volvo. Her car registration is $250 and covers the period 1/1/13 through 12/31/13. In addition, she paid $320 in property tax to the town based on the value of the car.

12. Paige incurred the following un-reimbursed medical costs in 2013. Her ex-husband, Ray, was tight on cash and she paid some expenses on Ray and Julius behalf.

Dentist (Anika) $3,500
Dentist (Julius) $1,000
Dentist (Paige) $2,000
Fertility treatments (Paige) $12,000
Doctor/copay (Anika) 4,000
Doctor/copay (Paige) 3,000
Prescription drugs (Paige) 850
Over-the-counter drugs (Paige & Anika) 150
Optometrist (Paige) 750
Lasik (Paige) 2,000
Liposuction (Paige) 2,500
Emergency room charges (Ray) 3,000
Chiropractor Paige 8,000

13. Paige received several Form 1098 statements from her bank for interest paid by her in 2013. Details appear below and/or at Exhibit A.

Interest paid related to …
Original mortgage on her personal residence $6,800
Home equity loan on her personal residence (for New Deck) 800
Credit cards 750
Car loan 650

14. On May 20, 2013, Paige contributed clothing to the Salvation Army. The original cost of the clothing was $3,000. She received a statement from the Salvation Army valuing the donation at $750. She also donated a coin collection with an original cost of $300 and an appraised value of $1,000. The Salvation Army is located at 350 Stone Ridge Road, Bangor, Maine 04401. In addition, she made the following cash contributions and received a statement from each of the above organizations acknowledging her contribution.
SIUE $15,000
United Way 1,000
First Methodist Church 2,500
Local Chamber of Commerce 500

15. To make extra money, Paige worked as a nuclear consultant for Atoms Away power plant. She received a 1099 for $45,000. Her only capital expenditure related to this work was specialized computer equipment at a cost of $20,000 used 100% for business purposes. She would like to deduct as much as possible in the current year. She drove her personal car 500 non-commuting business miles as part of her consulting work. She paid $2,000 for airline tickets for consulting. She has $800 of meals and entertainment related to business lunches related to her consulting business. She has no other expenses related to her consulting business.

16. Paige’s company (ASCI) has an accountable expense reimbursement plan for employees from which Paige receives $10,000 allocated proportionally allocated to the following expenses: (These are employee expenses, not expenses related to her consulting work. Assume 100% business related.)

Airfare $8,000
Hotel 4,500
Meals 3,200
Car rentals 1,000
Entertainment (with clients) 800
Incidentals 400

17. During the 2013 year, she also paid $575 for business publications and $1,500 for a local CPA to prepare her 2012 tax return.

18. Paige continues to own the house at 692 River Road and has rented it to tenants 11 months and had it available for rent for 1 month in 2013. She had the following income and expenses related to the duplex during 2013:

Rent Income $25,000
Mortgage Interest $ 4,000
Replace roof $10,000
Other ordinary repairs and maintenance $ 1,000
Monthly Cleaning & Lawn expenses $ 800
Real Estate Taxes $ 2,000
Advertising $ 400

19. Paige won a $25,000 boat and $10,000 cash on the Price is Right.

Exhibits: Forms 1099 and 1098
This is important tax information and is being furnished to the Internal Revenue Service.

1099-Div Dividends & Distributions
Entity Description Amount
General Dynamics Ordinary gross dividends $900
General Dynamics Qualified dividends $900

1099-Int Interest
Entity Description Amount
New Jersey Economic Development Bonds Gross interest $ 1,750
City of Toronto Canada Bonds Gross interest 1,000
State of Nebraska Bonds Gross interest 200
Ford, Inc. Bonds Gross interest 2,500

1098-Mortgage Interest Statement
Entity Description Amount
Sunbelt Credit Union Mortgage interest $7,100
Dynamo Credit Broker Second Mortgage interest 800

Due Date: The project is due by April 21, 2014. You may either turn in a printed copy of your work in during class, directly to me during my office hours, my mailbox on the 4th floor or you may have your work scanned into a pdf file (one file) and email it to me (by midnight). There is a 25% penalty for late filing without an extension.

1) Determine Paige’s 2013 taxable income, her tax liability, and the amount of any tax or refund due. Complete her 2013 federal income tax return. Prepare the return using IRS fill in forms (adobe pdf files).

Prepare supporting schedules to show calculations you made to determine a reported number.

The instructions for Form 1040 and other forms will be helpful. The forms, schedules and instructions can be found at the web address below.

2) Accompanying the assembled tax return should be a cover letter and a bill ($50/hour per person) for tax preparation services to Paige. In the cover letter, please let her know where to file the return, to send it certified with return receipt requested, whether they have an amount due or can expect a refund, who to make the check out to if they owe money and a reminder to sign the return. Make sure the letter is in a professional format.



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