Question

Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through November 10, 2018, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this coverage through the end of 2018. He received $7,000 of unemployment compensation from November 11, 2018, through December 31, 2018. FICA withholdings were as follows: Social Security of $2,790 ($45,000 x 6.2%) and Medicare of $653 ($45,000 x 1.45%). Justin lives at 112 Green Road, Crown City, OH 45623. His Social Security number is 111-11-1112.

Justin owned an apartment building until November 22, 2018 when he sold it for $200,000 (the apartment building's address is 4826 Orange Street, Crown City, OH 45623). For 2018, he had rent revenue of $33,000. He incurred and paid expenses as follows: $4,568 of repairs, $12,000 of mortgage interest, $10,000 of real estate taxes, and $1,000 of miscellaneous expenses. He purchased the building on January 2, 2012, for $125,000. The building generated an operating profit each year that Justin owned it. Justin received $13,000 in cash as a gift from his mother to help “tide him over” while he was unemployed. He also withdrew $10,000 from his checking account. He “invested” $300 in lottery tickets during the year but had no winnings.

Other information follows:

• On November 22, 2018, Justin sold for $3,500 equipment that had been used for repairing various items in the apartments. The equipment was purchased for $25,000 on July 10, 2011, and was fully depreciated prior to 2018.
• Justin has $3,000 of unrecaptured § 1231 losses from prior years.
• Justin is age 38; is single; is divorced; and has custody of his 9-year-old son, Flint. Justin provides more than 50% of Flint’s support. Flint’s Social Security number is 123-45-6789.
• Justin had $1,000 interest income from Blue Corporation bonds.
• Justin had $1,500 interest income from a State Bank certificate of deposit.
• Justin had a $2,000 0% / 15% / 20% long-term capital gain distribution from the Brown Stock Investment Fund.
• Justin had the following itemized deductions: $4,600 real estate taxes on his home; $8,900 mortgage interest on his home; $4,760 charitable contributions (all in cash, all properly documented, and no single contribution exceeding $25); $4,300 state income tax withholding during 2018; $2,000 state estimated income tax payments during 2018; $2,600 sales taxes paid.
• Justin does not want to donate to the Presidential Election Campaign Fund.
• He had $10,000 of Federal income tax withholding during 2018 and made total Federal estimated income tax payments of $12,000 during 2018.

Required:
Compute Justin's 2018 net tax payable or refund due by providing providing the information requested for Form 1040 and Schedules A, B, D, and E and Forms 4562, 4797, and 8582.

• Make realistic assumptions about any missing data.
• If an answer is zero, enter "0".
• Enter all amounts as positive numbers.
• It may be necessary provide information regarding the other tax schedules before completing Form 1040.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.

Provide the following that would be reported on the Justin's Form 1040.

1. Filing status and dependents: The taxpayers' filing status:

Indicate whether Flint can be claimed as a dependent by Justin.

2. Calculate taxable gross income.
$

3. Calculate the total deductions for AGI.
$

4. Calculate adjusted gross income.
$

5. Calculate the greater of the standard deduction or itemized deductions.
$

6. Calculate total taxable income.
$

7. Calculate the income tax liability.
$

8. Calculate the total tax credits available.
$

9. Calculate total withholding and tax payments.
$

11. Calculate the amount overpaid (refund):
$

12. Calculate the amount of taxes owed:
$

Provide the following that would be reported on the Justin's Schedule A.

1. Calculate the deduction allowed for medical and dental expenses.
$

2. Calculate the deduction for taxes.
$

3. Calculate the deduction for interest.
$

4. Calculate the charitable deduction allowed.
$

5. Calculate total itemized deductions.
$

Provide the following that would be reported on the Justin's Schedule B.

1. Calculate the interest amount:
$

2. Calculate the ordinary dividends:
$

Provide the following that would be reported on the Justin's Form 4562.  
Click here to access the depreciation table to use for this problem.

1. Calculate the total elected cost of section 179 property:
$

2. Calculate the depreciation deduction:
$

Provide the following that would be reported on the Justin's Form 4797.
Hint: You will have to compute the accumulated depreciation for the apartment building. Click here to access the depreciation table.

1. Calculate the total gain for all transactions reported on Form 4797:
$

2. Indicate the amount of the gain from part (1) that is reported for the following:
Equipment sale - § 1245 ordinary gain: $
Apartment building - Ordinary income due to § 1231 lookback rules: $
Apartment building - Long-term capital gain: $

Provide the following that would be reported on the Justin's Form 8582.

1. Calculate the amount reported as passive income on Form 8582:
$

2. Calculate the amount reported as passive losses on Form 8582:
$

2018 Tax Rate Schedules

Use the 2018 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables.)

2018 Tax Rate Schedules
Single—Schedule X											Head of household—Schedule Z
If taxable income is: Over—		But not over—		The tax is:				of the amount over—			If taxable income is: Over—		But not over—		The tax is:				of the amount over—
$0		$9,525		. . . . . .		10%		$0			$0		$13,600		. . . . . .		10%		$0
9,525		38,700		$952.50	+	12%		9,525			13,600		51,800		$1,360.00	+	12%		13,600
38,700		82,500		4,453.50	+	22%		38,700			51,800		82,500		5,944.00	+	22%		51,800
82,500		157,500		14,089.50	+	24%		82,500			82,500		157,500		12,698.00	+	24%		82,500
157,500		200,000		32,089.50	+	32%		157,500			157,500		200,000		30,698.00	+	32%		157,500
200,000		500,000		45,689.50	+	35%		200,000			200,000		500,000		44,298.00	+	35%		200,000
500,000		. . . . . .		150,689.50	+	37%		500,000			500,000		. . . . . .		149,298.00	+	37%		500,000
Married filing jointly or Qualifying widow(er)—Schedule Y-1											Married filing separately—Schedule Y-2
If taxable income is: Over—		But not over—		The tax is:				of the amount over—			If taxable income is: Over—		But not over—		The tax is:				of the amount over—
$0		$19,050		. . . . . .		10%		$0			$0		$9,525		. . . . . .		10%		$0
19,050		77,400		$1,905.00	+	12%		19,050			9,525		38,700		$952.50	+	12%		9,525
77,400		165,000		8,907.00	+	22%		77,400			38,700		82,500		4,453.50	+	22%		38,700
165,000		315,000		28,179.00	+	24%		165,000			82,500		157,500		14,089.50	+	24%		82,500
315,000		400,000		64,179.00	+	32%		315,000			157,500		200,000		32,089.50	+	32%		157,500
400,000		600,000		91,379.00	+	35%		400,000			200,000		300,000		45,689.50	+	35%		200,000
600,000		. . . . . .		161,379.00	+	37%		600,000			300,000		. . . . . .		80,689.50	+	37%		300,000

Answer 1