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OE S4 (Annuities / Social Security Benefits)

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OE S4 (Annuities / Social Security Benefits). (1) Charlie purchased an annuity from an insurance company for $120,000. He is to receive $900 per month for life starting January 2020. His life expectancy is assumed to be 20 years from the annuity starting date (i.e., fixed payments). (2) Charlie has $12,000 of social security benefit. According to the formula, assume the taxable social security benefit is equal to $8.000. S5 (Income Tax Refund from State/Local Government). Charlie received a refund, $100, from the state of Massachusetts when he filed his state income tax return on March 17th, 2020. Assume Charlie claimed itemize deduction (not standard deduction) and deducted $5,000 of state/local income tax for his 2019 Federal tax return (which he also filed on March 17th, 2020). S6 (Business Income or Loss). (1) Julie is a dentist and operates “Julie's Smile” as a sole proprietorship (accrual basis), which is located at 200 Morrissey Blvd, Boston, MA 02125. The principal business is "Offices of Dentists," and the code is "621210." Julies, who materially participates in the business, has the following gross receipts and expenses related to her business: gross receipts from patients $150,000 advertising $10,000 insurance premium for medical accidents $20,000 equipment rental $30,000 office rent $40,000 supplies $25,000 (2) Julie is considering opening a new restaurant in Washington D.C. She incurs $1,000 for travel, $4,000 for consulting expenses, and $5,000 for market analysis. She did not acquire or start a new restaurant (3) Julie made estimated quarterly payments of $1,600 during the year (i.e., each $400 quarterly payment). (4) If Julie's business has profit, self-employment taxes need to be considered. S7 (Capital Gain or Loss). Regarding capital assets which Charlie had own, the following situations occurred: (1) LinkedIn Stock: date acquired 02/27/2020, date sold 12/08/2020, selling price $3,000, adjusted basis $2,800 (2) Google Bond: date acquired 10/19/2014, date sold 02/25/2020, selling price $4,000, adjusted basis $5,100. (3) Personal Car: date acquired 10/15/2020, date sold 12/24/2020, selling price $5,500, adjusted basis $5,000 In addition, Charlie had $2,500 of short-term capital loss carried from 2019 and $600 of long- term capital loss carried from 2019. S8 (Prize / Personal Physical Injury). (1) Julie had $30,000 of (reportable) gambling winnings. (2) Charlie got hit by a truck driver who had a blood alcohol level of .15. He received $40,000 of medical care, $8,000 of loss of income, and $22,917 of punitive damage. S9 (Itemized Deduction). (1) Charlie spends $17.500 on qualified medical and dental expenses not covered by insurance. He receives $2,750 from the flexible benefits plan for these expenses. (2) The following situations are related to state and local taxes: 1) During 2020, Charlie had $4,000 of state income taxes withheld in his W-2. 2) Charlie and Julie maintained their sales tax receipts where the total is $5,500. The optional sales tax amount given by the IRS table is $2,000. (3) The following situations are related to Charlie and Julie's personal home: 1) Charlie and Julie paid real estate taxes of $6,000 on their home. 2) Qualified interest on their home mortgage was $9,800. (4) Charlie and Julie contributed $5,000 cash to Boston Church and gave used clothing (fair market value of $700) to the Salvation Army. They also had $1,750 of charitable contribution carried over from 2019. The contribution limit is 30% of AGI. (5) Greedy Julie went to the casino several times. She lost $40,000 of her own money. S10 (Child Tax Credit / Credit for Other Dependents). First, determine who is eligible for the tax credit(s). Then, calculate the amount of tax credit(s). s11 (Credit for Child and Dependent Care Expenses). Charlie and Julie incurred qualified child-care of $7,000 for Max. Charlie received $2,250 from the flexible benefits plan for these expenses. The followings are the information regarding the care provider. 1) Name: “Learning Express" 2) Address: "300 Morrissey Blvd., Boston, MA 02125 3) EIN:45-1111111 S12 (Education Tax Credit). Charlie and Julie paid qualified tuition of $6,500 for Claudia. The following situations all occurred during 2020 (unless stated otherwise), and Charlie's household includes the following persons: Relationship to Charlie Social Security # Charlie Brown (age 62) 123-45-6789 Julie Brown (age 45) Wife 123-45-6788 Claudia Brown (age 21) Daughter 123-45-6787 Max Brown (age 5) Son 123-45-6786 Samuel Yellow (age 46) Friend 987-65-4321 si (Filing Status / Dependents). (1) Charlie and Julie (calendar year taxpayers) file a joint return, and live with Max at 100 Morrissey Blvd, Boston, MA 02125. (2) Claudia (single) eams $15,000 as a part-time waitress in Chicago. She provides 40% of her own support whereas Charlie provides 60% of her support. Claudia studies at the University of Chicago as a full-time undergraduate student (Sophomore). Claudia's taxable salaries are $6,000. (3) Samuel (single) is an old buddy of Charlie and lives with Charlie during the entire year. Since Samuel has no gross income, Charlie provides 100% of support and maintains the household for Samuel (4) All of them are U.S. citizens. S2 (Payroll / Employee Benefits). (1) Charlie works for PwC, and his annual salary is $80,000. (2) PwC withholds $7,763 of Charlie's salary for federal income taxes. (3) PwC provides all employees with (a) medical insurance (Charlie's insurance cost $5,000). PwC also offers a (b) group-term life insurance where the coverage amount for Charlie is $800,000. The monthly cost per $1,000 coverage is $0.15. Assume 12-month coverage. (4) Charlie lets KPMG withhold $5,000 under the company's flexible benefits plan; $2,750 for medical and dental expenses and $2,250 for child-care expenses. (5) PwC has a qualified pension that covers all employees. Under the plan, PwC matches contributions to the plan up to 5% of the employee's annual salary. Charlie makes the maximum allowable contribution, i.e., 10% of his annual salary. S3 (Interest / Dividend). (1) Julie received interest of $600 on saving account at KeyBanc. Charlie received interest of $800 on State of Massachusetts bond. (2) Charlie received dividends of $5,000 from Verizon Wireless Co. where he purchased the stock 2 days before the ex-dividend date and sold it 20 days after the ex-dividend date. SCHEDULE D (Form 1040) Capital Gains and Losses OMB No. 1545-0074 2020 Department of the Treasury Internal Revenue Service 99 Names) shown on retum Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Scheduled for instructions and the latest information. Use Form 8949 to list your transactions for lines 1b, 2, 3, 8b, 9, and 10. Attachment Sequence No. 12 Your social security number Did you dispose of any investment(s) in a qualified opportunity fund during the tax year? Yes No If "Yes," attach Form 8949 and see its instructions for additional requirements for reporting your gain or loss. Part 1 Short-Term Capital Gains and Losses-Generally Assets Held One Year or Less (see instructions) See instructions for how to figure the amounts to enter on the tal th) Gain or loss) lines below. Id le) Adjustments Subtract column el Proceeds Cast to gain or loss from from column(d, and This form may be easier to complete if you round off cents to sales price for other basis) whole dollars. Formis) 8949, Part 1 combine the result line 2. columna with column 1a Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 1b 1b Totals for all transactions reported on Form(s) 8949 with Box A checked 2 Totals for all transactions reported on Form(s) 8949 with Box B checked 3 Totals for all transactions reported on Form(s) 8949 with Box C checked 4 Short-term gain from Form 6252 and short-term gain or loss) from Forms 4684, 6781, and 8824 4 5 Net short-term gain or loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1 . 5 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions 6 7 Net short-term capital gain or loss). Combine lines 1a through 6 in column (h). If you have any long- term capital gains or losses, go to Part II below. Otherwise, go to Part Ill on the back 7 Part II Long-Term Capital Gains and Losses-Generally Assets Held More Than One Year (see instructions) See instructions for how to figure the amounts to enter on the tal th) Gain or loss) lines below. id lel Adjustments Proceeds Subtract columne Cost to gain or loss from from column(d, and This form may be easier to complete if you round off cents to sales price for other basis) Formis) 8949, Part 1, combine the result whole dollars. line 2 column with columna 8a Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 8b 8b Totals for all transactions reported on Form(s) 8949 with Box D checked .. 9 Totals for all transactions reported on Form(s) 8949 with Box E checked 10 Totals for all transactions reported on Form(s) 8949 with Box F checked. 11 Gain from Form 4797, Part 1; long-term gain from Forms 2439 and 6252; and long-term gain or loss) from Forms 4684, 6781, and 8824 11 12 Net long-term gain or loss) from partnerships, Scorporations, estates, and trusts from Schedule(s) K-1 12 13 Capital gain distributions. See the instructions 13 14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions 14 15 Net long-term capital gain or (loss). Combine lines Ba through 14 in column (h). Then, go to Part III on the back For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11338H Schedule D (Form 1040) 2020 15 Page 2 Schedule D(Form 1040) 2020 Part III Summary 16 16 Combine lines 7 and 15 and enter the result If line 16 is a gain, enter the amount from line 16 on Form 1040, 1040-SR, or 1040-NR, line 7. Then, go to line 17 below. • If line 16 is a loss, skip lines 17 through 20 below. Then, go to line 21. Also be sure to complete line 22. • If line 16 is zero, skip lines 17 through 21 below and enter - - on Form 1040, 1040-SR, or 1040-NR, line 7. Then, go to line 22. Are lines 15 and 16 both gains? Yes. Go to line 18. No. Skip lines 18 through 21, and go to line 22. 17 18 If you are required to complete the 28% Rate Gain Worksheet (see instructions), enter the amount, if any, from line 7 of that worksheet 18 19 If you are required to complete the Unrecaptured Section 1250 Gain Worksheet (see instructions), enter the amount, if any, from line 18 of that worksheet 19 20 Are lines 18 and 19 both zero or blank and are you not filing Form 4952? Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Forms 1040 and 1040-SR, line 16. Don't complete lines 21 and 22 below. No. Complete the Schedule D Tax Worksheet in the instructions. Don't complete lines 21 and 22 below. 21 } 21 If line 16 is a loss, enter here and on Form 1040, 1040-SR, or 1040-NR, line 7, the smaller of. .The loss on line 16; or • ($3,000), or if married filing separately, ($1,500) Note: When figuring which amount is smaller, treat both amounts as positive numbers. 22 Do you have qualified dividends on Form 1040, 1040-SR, or 1040-NR, line 3a? Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Forms 1040 and 1040-SR, line 16. No. Complete the rest of Form 1040, 1040-SR, or 1040-NR. Schedule D (Form 1040) 2020 SCHEDULEC Profit or Loss From Business OMB No. 1545-0074 (Form 1040) (Sole Proprietorship) 2020 Department of the Treasury ?Go to www.irs.gov/Schedule for instructions and the latest information. Attachment Internal Revenue Services Attach to Form 1040, 1040-SR, 1040-NR, or 1041; partnerships generally must file Form 1065. Sequence No. 09 Name of proprietor Social Security number (SSN) A Principal business or profession, including product or service (see instructions) B Enter code from instructions ? Business name. If no separate business name, leave blank. D Employer ID number (EIN) (see instr.) ???? ?? E Business address (including suite or room no.) City, town or post office, state, and ZIP code F Accounting method: (1) Cash (2) Accrual (3) Other (specity) G Did you "materially participate in the operation of this business during 2020? If "No," see instructions for limit on losses Yes No H If you started or acquired this business during 2020, check here. 1 Did you make any payments in 2020 that would require you to file Forms) 1099? See instructions Yes No J If "Yes." did you or will you file required Formis) 1099? Yes No Parti Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the "Statutory employee" box on that form was checked. 1 2 Retums and allowances. 2 3 Subtract line 2 from line 1 3 4 Cost of goods sold (from line 42) 4 5 Gross profit. Subtract line 4 from line 3 5 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) 6 Gross income. Add lines 5 and 6 7 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising 8 18 Office expense (see instructions) 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans 19 instructions). 9 20 Rent or lease (see instructions): 10 Commissions and fees 10 a Vehicles, machinery, and equipment 20a 11 Contract labore instructions 11 b Other business property 20b 12 Depletion 12 21 Repairs and maintenance 21 13 Depreciation and section 179 22 Supplies (not included in Part III) 22 expense deduction (not 23 included in Part III) (see Taxes and licenses. 23 instructions) 13 24 Travel and meals: 14 Employee benefit programs a Travel 24a (other than on line 19). 14 b Deductible meals (see 15 Insurance (other than health 15 instructions - 24b 16 Interest (see instructions): 25 Utilities 25 a Mortgage paid to banks, etc.) 16a 26 Wages (less employment credits) 26 b Other 16b 27a Other expenses (from line 48) 27a 17 Legal and professional services 17 b Reserved for future use 28 Total expenses before expenses for business use of home. Add lines 8 through 27a 28 29 Tentative profit or loss). Subtract line 28 from line 7. 29 30 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method. See instructions. Simplified method filers only: Enter the total square footage of (a) your home: and (b) the part of your home used for business: Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line 30 30 31 Net profit or loss). Subtract line 30 from line 29 • If a profit, enter on both Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2. (If you checked the box on line 1. see instructions). Estates and trusts, enter on Form 1041, line 3. 31 • If a loss, you must go to line 32 32 If you have a loss, check the box that describes your investment in this activity. See instructions. • If you checked 32a, enter the loss on both Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2. (If you checked the box on line 1. see the line 31 instructions). Estates and trusts, enter on 32a All investment is at risk. Form 1041, line 3. 32b Some investment is not • If you checked 32b, you must attach Form 6198. Your loss may be limited. at risk. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2020 27b OD Page 2 Schedule C (Form 1040) 2020 Part III Cost of Goods Sold (see instructions) 33 34 Yes No Method(s) used to value closing inventory: Cost Lower of cost or market Other (attach explanation) Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation Inventory at beginning of year. If different from last year's closing inventory, attach explanation Purchases less cost of items withdrawn for personal use 35 35 36 36 37 37 Cost of labor. Do not include any amounts paid to yourself Materials and supplies 38 38 39 Other costs. 39 40 Add lines 35 through 39 40 41 Inventory at end of year 41 42 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4. Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. 43 44 a Business When did you place your vehicle in service for business purposes? (month/day/year) of the total number of miles you drove your vehicle during 2020, enter the number of miles you used your vehicle for: b Commuting (see instructions) Was your vehicle available for personal use during off-duty hours? Do you (or your spouse) have another vehicle available for personal use? e Other 45 Yes No 46 Yes No 47a Do you have evidence to support your deduction? Yes No Yes Π No b"Yes," is the evidence written? Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. 48 Total other expenses. Enter here and on line 27 48 Schedule C (Form 1040) 2020