Question

Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2016. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a local law firm. During 2018, he had the following receipts:

Salary				$ 80,000
Interest income—
Money market account at Omni Bank		$300
Savings account at Boone State Bank		1,100
City of Springfield general purpose bonds		3,000		4,400
Inheritance from Daniel				60,000
Life insurance proceeds				200,000
Amount from sale of St. Louis lot				80,000
Proceeds from estate sale				9,000
Federal income tax refund (for 2017 tax overpayment)				700

Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2018. Logan also was the designated beneficiary of an insurance policy on Daniel's life with a maturity value of $200,000. The lot in St. Louis was purchased on May 2, 2013, for $85,000 and held as an investment. Because the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2018, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.

Logan's expenditures for 2018 include the following:

Medical expenses (including $10,500 for dental)				$11,500
Taxes—
State of Missouri income tax (includes withholdings during 2018)		$4,200
Property taxes on personal residence		4,500		8,700
Interest on home mortgage (Boone State Bank)				5,600
Contribution to church (paid pledges for 2018 and 2019)				4,800

Logan and his dependents are covered by his employer's health insurance policy for all of 2018. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helen's implants. Helen is Logan's widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 5, 2018, upon the advice of his pastor, he prepaid his pledge for 2019.

Logan's household, all of whom he supports, includes the following:

	Social Security Number	Birth Date
Logan Taylor (age 48)	123-45-6787	08/30/1970
Helen Taylor (age 70)	123-45-6780	01/13/1948
Asher Taylor (age 23)	123-45-6783	07/18/1995
Mia Taylor (age 22)	123-45-6784	02/16/1996

Helen receives a modest Social Security benefit. Asher, a son, is a full-time student in dental school and earns $4,500 as a part-time dental assistant. Mia, a daughter, does not work and is engaged to be married.

Federal income tax of $4,500 was withheld from his wages.

Complete Form 1040 below for Logan Taylor.

Form 1040 (2018) Logan B. Taylor 123-45-6787 Page 2 Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 1 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . 1 80,000    2a Tax-exempt interest 2a 3000      b   Taxable interest 2b 1400 3a Qualified dividends 3a   b   Ordinary dividends 3b 4a IRAs, pensions, and annuities 4a   b   Taxable amount 4b 5a Social security benefits 5a   b   Taxable amount 5b 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 -3000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 78400 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 . . . . . . . . . . . . . . 7 78400 Standard Deduction for– • Single or married filing separately, $12,000 • Married filing jointly or Qualifying widow(er), $24,000 • Head of household, $18,000 • If you checked any box under Standard deduction, see instructions. 8 Standard deduction or itemized deductions (from Schedule A) . . . . . . . . . . . 8 24720 9 Qualified business income deduction (see instructions) . . . . . . . . . . . . . . . . . . . . 9 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0- . . . . 10 53680 11 a Tax (see inst) ? (check if any from: 1 ◻ Form(s) 8814 2 ◻ Form 4972 3 ◻ ) b Add any amount from Schedule 2 and check here . . . . . . . . . . . . . . . . . . . ► ◻ 11 ? 12 a Child tax credit/credit for other dependents 1500 b Add any amount from Schedule 3 and check here . . . . . . . . . . . . . . . . . . . ► ◻ 12 1500 13 Subtract line 12 from line 11. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . 13 ? 14 Other taxes. Attach Schedule 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ? 15 Total tax. Add lines 13 and 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ? 16 Federal income tax withheld from Forms W-2 and 1099 . . . . . . . . . . . . . . . . . . . . 16 4500 17 Refundable credits:   a EIC (see inst.) b Sch 8812   c Form 8863 Add any amount from Schedule 5 . . . . . . . . . . . . . . . . . . . . 17 18 Add lines 16 and 17. These are your total payments . . . . . . . . . . . . . . . . . . . . . 18 4500 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ► ◻ 20a Direct deposit? ► b Routing number ► c Type: ◻ Checking ◻ Savings See instructions. ► d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax . . . . . . . . . . . . . . . . . . ► 21 Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ► 22 ? 23 Estimated tax penalty (see instructions) . . . . . ► 23 Form 1040 (2018)

I need help with 11a where it says "Tax (see inst)," 11, 13-15, and 22.

Answer 1

Part 1—Tax Computation

Notes
(1) Interest on state and local bonds is excluded from gross income. See Exhibit 3.1 in the text.
(2) Inheritances are excluded from gross income. See Exhibit 3.1 in the text.
(3) Life insurance proceeds are nontaxable. See Exhibit 3.1 in the text.
(4) Logan has a realized long-term capital loss of $5,000 [$80,000 (selling price) − $85,000 (cost basis)] from the sale of the lot. Absent any offsetting capital gains, however, he can deduct only $3,000 against ordinary income. The $2,000 unabsorbed capital loss can be carried over to 2019.

(5) The basis of the property inherited is its fair market value on the date of the decedent’s death. The basis of any other property that was sold is its cost (see Chapter 13 in the text). Consequently, the estate sale most likely resulted in a realized loss. Because the loss is personal, it cannot be recognized. Thus, the estate sale results in no income tax consequences.
(6) A Federal income tax refund is a return of a nondeductible expenditure and, therefore, is nontaxable.
(7) Charitable contributions are deductible in the year paid ($2,400 + $2,400 = $4,800). Therefore, the year for which they were pledged does not matter.
(8) Logan is a surviving spouse for filing purposes.
(9) Helen and Mia meet the qualifying relative tests. Asher is a qualifying child (under age 24 and a full-time student), so he is not subject to the gross income test. Logan is able to claim a $1,500 dependent tax credit (3 × $500; for Asher, Mia, and Helen). Neither Mia nor Asher qualifies for the child tax credit; both are over 16 years old. The dependent tax credit is not refundable.