Acct 323 section 7320 – comprehensive tax problem

Instructions:
Please complete the required federal individual income tax return forms for the following taxpayer. For purposes of this assignment you should ignore attaching federal Form 8582.  Unless instructed otherwise, the information provided is for the taxpayer’s 2012 tax year. Please complete her 2012 tax return (including Form 1040 and any relevant supporting schedules).
Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. Also, if required information is missing, use reasonable assumptions to fill in the gaps. The instructions to Form 1040 and schedules can be extremely helpful in completing the return. You are to work completely independently on this assignment and are not permitted to consult with another person!
Form 1040, supporting schedules, and instructions to the forms and schedules can be found at the
IRS Web site (www.irs.gov).
Please upload the completed tax return to your student assignment folder. The assignment is due
by Sunday, Nov. 10 at 11:59 pm EST.

Facts:
Sarah Hamblin is your client. Sarah and her now ex-husband Kevin were legally divorced on March 1 of the year for which you are completing the tax return. As of the end of year, Sarah was single. Sarah and Kevin had only one child: an 11 year old girl named Elizabeth. As part of the divorce decree, Sarah was given custody of Elizabeth and Kevin was required to pay child support for Elizabeth’s care as well as alimony to Sarah until she remarries or dies. Because Kevin would be making child support payments, the divorce decree provided that Kevin would be permitted to claim the tax dependency exemption for Elizabeth until Elizabeth no longer qualifies as a tax dependent of her parents, and the decree obligates Sarah to sign and/or file any required forms to cause this result to occur.
Sarah rents a home (separate from Kevin) that she pays for herself. Elizabeth lives with Sarah most of the time, but she visits and stays with her father every other weekend and most holidays. During the year, Elizabeth stayed at Kevin’s house a total of 74 nights.

The following information relates to Sarah’s tax year:

Sarah’s social security number is 123-43-4321
Elizabeth’s social security number is 123-34-1234
Sarah’s mailing address is 1245 Rose Petal Drive, Madison, Wisconsin 53562
Elizabeth is a U.S .citizen

Sarah Hamblin received the following income during the year:
Company

Gross Wages

Central Wisconsin
Heating and Air

34,350

Federal Income Tax
Withholding
6,950

State Income Tax
Withholding
2,125

ACCT 323 Section 7320
Comprehensive Tax Problem
Professor Weber

All applicable and appropriate payroll taxes were withheld by the employer.
During the year, Sarah also received the following:
Child Support Payment from Kevin Hamblin
Alimony Payment from Kevin Hamblin
Gift from her father to help with legal bills
Interest income on U.S. Treasury Bond
Interest income of Madison City Bond (municipal)
Interest income from First Bank of Madison
Life insurance proceeds on the death of her mother

$12,000
$16,000
$ 8,500
$ 400
$ 250
$ 165
$45,000

Sarah is a 50% owner in a friend’s company, Bright Day Flowers (“BDF”). BDF is a Subchapter S corporation. The company reported ordinary business income for the year of $22,000. Sarah acquired the stock several years ago. BDF’s employer identification number is 56-3535353. Sarah won 10 tickets through a radio contest to the touring broadway-style production of Wholesome. The value of the tickets was $200 each. Sarah took her friends from work to the production.
Sarah lost her job with Central Wisconsin Heating and Air on November 15 because of a reduction in work force. She collected $1,250 in unemployment benefits. She is currently looking for another job.
Sarah did not own, control or manage any foreign bank accounts nor was she a grantor or beneficiary of a foreign trust during the tax year.
Through work Sarah was provided with certain benefits as part of her employment:
• Group-term life insurance coverage of $50,000. Cost to cover Sarah for the company for the tax year is $150.

• Access to the company photocopy machine. Sarah estimates she made $40 worth of copies during the year primarily for use with her church group activities.

Sarah reported no itemized deductions other than any described above.
Sarah does not want to contribute to the Presidential Election Campaign. She would like to receive a refund (if any) of any tax she may have overpaid for the year. Her preferred method of receiving the refund is by check.

 

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