Tax Return Problems
Tax Return Problem 6.1
Inge Hoover, LLB, is a 38-year-old single taxpayer living at 456 Sherman Street, Denver, Colorado 80209. Her Social Security number is 886-56-8935.
| Item | Amount |
|---|---|
| Earnings as attorney for law firm | $142,000 |
| Federal income tax withheld | 39,640 |
| Colorado income tax withheld | 15,260 |
| Tax-exempt interest from private activity bonds | 28,660 |
| Interest on J.C. Penny Corp. bonds | 4,200 |
| Savings account interest—Pioneer Savings Bank | 980 |
| Home mortgage interest | 26,100 |
| Home equity debt interest (she bought an Audi R8 from the loan’s $110,000 proceeds) | 10,600 |
| Colorado automobile registration fees (2 automobiles; deductible portion only) | 1,950 |
| Property taxes on personal residence | 6,420 |
| Blue Cross premiums | 4,200 |
| Other medical expenses | 600 |
| CPA fees paid to handle 2006 IRS audit | 800 |
| Charitable Contributions (all qualified charities and substantiated amounts): Nature Conservancy; Corona St. Lutheran Church | 1,200 640 |
| Reported (to Denver Police Department) theft of jewelry from her home. Purchased ten years ago at cost was $6,300; appraised value was $9,700. Insurance reimbursement was limited to $2,500. | ? |
| Completed a tax class at Metropolitan State College. Tuition, books and fees | $630 |
Required: Complete Inge’s federal tax return for 2008. Use Form 1040, Schedule A, Schedule B, Form 6251, and any other appropriate schedule(s) you need. Make realistic assumptions about any missing data.
Tax Return Problem 6.2
Eliza and Erik Hayes have one child, Emma, who is 8 years old. The Hayes reside at 2354 Software Lane, San Jose, California 93547. Eliza’s Social Security number is 151-771-1331, Erik’s is 147-79-8473, and Emma’s is 458-92-2114. Eliza and Erik provided the following information:
Eliza’s earnings from Cisco (purchasing manager): $64,300
Federal income tax withheld: $9,820
State income tax withheld: $1,750
Erik’s earnings from Foothills College (computer science teacher): $47,200
Federal income tax withheld: $7,300
State income tax withheld: $1,060
Their other income includes qualified dividends on Juniper stock of $800 and interest from Teachers Credit Union of $950. Other information and expenditures include the following:
Interest:
On home acquisition mortgage: $11,250
Credit card: $825
Taxes:
Property taxes on personal residence: $3,200
State income taxes paid in 2008 (for 2007): $540
Contribution (with written acknowledgement) to church: $520
Medical insurance: $2,900
Medical and dental expenses: $200
Income tax return preparation fee paid in 2008: $300
Payment of teachers union dues: $600
Child care for Emma: $3,500
Required: Complete the Hayes’s federal tax return for 2008. Use Form 1040, Schedule A, Line 44 worksheet, and Form 2441. Assume any other data you need.
