Whittenburg Gerald E., Altus-Buller Martha. Income Tax Fundamentals
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Life insurance (universal policy) 750
Property taxes on personal residence 1,350
Blue Cross medical insurance premiums 650
Other medical expenses 790
Income tax preparation fee 250
Charitable contributions (in cash) 550
In his spare time, Robert trades stocks and bonds. During the year he had the fol-
lowing transactions (none of the stock is qualified small business stock):
Stock Acquired Sold Price Basis
Red Co. 02/01/03 10/05/10 $6,000 $2,500
Green Co. 06/11/10 08/03/10 $4,000 $4,500
Blue Co. 03/12/10 09/22/10 $6,000 $5,200
White Co. 05/12/02 10/15/10 $8,000 $5,000
Black Co. 09/15/02 11/01/10 $6,000 $7,000
Required: Complete Robert’s federal tax return for 2010. Use Form 1040, Schedule A,
Schedule B, Schedule D, Schedule M, and the worksheet on pages 8-53 to 8-60 to
complete this tax return. Make realistic assumptions about any missing data.
2. Kathy Kennedy (age 44) is a single taxpa yer and she lives at 212 North Pine Way,
Payson, AZ 85541. Her Social Security nu mber is 467-98-9784. Kathy’s earnings
and income tax withholding as the principal of the local high school for 2010 are:
Earnings from the school $55,000
Federal income tax withheld 8,800
State income tax withheld 700
Kathy’s other income includes qualifying dividends on New Mexico Public Service
stock of $4,000 and interest on a savings account at Payson National Bank of $275. In
April 2010, Kathy paid $450 due on her 2009 Arizona state income tax.
During the year, Kathy paid the following amounts (all of which can be
substantiated):
Home mortgage interest $9,300
MasterCard interest 550
Life insurance (whole life policy) 750
Property taxes on personal residence 1,350
Blue Cross medical insurance premiums 250
Other medical expenses 560
Income tax preparation fee 300
Charitable contributions (in cash) 750
Kathy had one stock transaction in 2010. Kathy received the following 1099-B from
her sale of Gold Company stock. All stock sales must be reported both to taxpayers and
to the IRS on Form 1099-B so the proceeds can be matched by the IRS to each tax
return. Kathy purchased the stock on August 31, 2009, for $42,800 before the stock
plummeted in the last months of 2009.
Questions and Problems 8-49
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
On January 28, 2010, Kathy sold raw land for $150,000 (basis to Kathy of $90,000).
The land was purchased 6 years ago. She received $30,000 as a down payment and the
buyer’s 10-year note for $120,000. The note is payable at the rate of $12,000 per year
plus 8 percent interest. On January 28, 2011, the first of the ten principal and interest
payments is due.
Required: Complete Kathy’s federal tax return for 2010. Use Form 1040, Schedule A,
Schedule B, Schedule D, Schedule M, the worksheet, and Form 6252 on Pages 8-61 to
8-69 to complete this tax return. Make realistic assumptions about any missing data.
GROUP 4:
CUMULATIVE SOFTWARE PROBLEM
.............................................. .............................................. .
The following additional information is available for the Dr. Ivan and Irene Incisor family
from Chapters 1–7.
Ivan sold the following securities during the year:
Security Description
Date
Acquired Date Sold
Selling
Price
Adjusted
Basis
Orange, Inc. 100 Shares Common 02/11/95 04/16/10 $ 3,000 $ 2,150
Banana, Inc. 100 Shares Common 07/17/99 07/31/ 10 1,950 4,210
Grape, Corp. 100 Shares Preferred 12/08/09 09/25/10 9,975 10,430
Plum, Inc. 5 Bonds due 4/2015 12/30/ 03 01/02/10 5,130 5,320
Peach Mutual Fund 5,010.150 Shares 05/30/04 10/22/10 60,120 56,480
The selling price given is net of sales commissions. In addition to the above amounts,
the Mango mutual fund distributed a long-term capital gain of $750 on December 30,
2010.
Big Brokerage Company
123 Wall Street
New York, NY 10014
XX-XXXXXXX
2-15-10
467-98-9784
17,000
X
Kathy Kennedy
212 North Pine Way
Payson, AZ 85541
100 shares
Gold Company Stock
8-50 Chapter 8
Capital Gains and Losses
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Ivan purchased 5 acres of raw land in Reno, NV, 10 years ago. His basis in the land was
$50,000. On August 1, 2010, he sold the land for $150,000 on the installment method. Ivan
received $30,000 in the year of sale, and the balance was payable at $12,000 per year for the
next 10 years, plus a market rate of interest.
On May 15, 2010, Ivan and Irene sold their personal residence for $585,000 and pur-
chased a new house for $725,000. They had owned the old house for 20 years and it
had an adjusted basis of $35,000. The house had been their personal residence for all
the years they were married. They moved into the new house on May 18, 2010.
Required: Combi ne this new infor mation about the Incisor family with the information
from Chapters 1–7 and complete a revised 2010 tax return for Ivan and Irene. No AMT
is payable. This completes the Group 4 multichapter case.
The size of the tax code has grown from around 400,000 words in 1955
to over 1,300,000 words today. Yale Law Professor Michael J. Graetz is
quoted in a Wall Street Journ al Tax Report as saying, ‘‘The tax code is
now more than six times longer than Tolstoy’s War and Peace and con-
siderably harder to parse.’’
Questions and Problems 8-51
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
8-52 Chapter 8
Capital Gains and Losses
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Questions and Problems 8-53
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
8-54 Chapter 8
Capital Gains and Losses
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Questions and Problems 8-55
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
8-56 Chapter 8
Capital Gains and Losses
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Questions and Problems 8-57
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
8-58 Chapter 8
Capital Gains and Losses
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.