You have been assigned to review the tax return.. Please casually review the return for accuracy and completeness and respond to the following:
Line 7 of Form 4797 is $50,898–At what rate(s) is this amount taxed?
Line 18(b) of Form 4797 is $2,500. At what (marginal) rate is this gain taxed, assuming that this is the very last incme?
Line 3(b) of Form 1040 is $1,155. At what rate(s) is this amount taxed?
Does the QBI deduction appear to be correct? This assumes that considering facts and circumstances that the rental activiies qualify as a trade or business.
The completion of this tax return involves receiving the records from the client, a client interview virtually or in person, the return preparation using computer software. your review, and delivery of the return with an exit interview in person or virtually. What sort of fee (i.e., how much?) do you think would be appropriate for this valuable service?
Accountancy 503 Spring 2020 Tax Return Assignment 2
Marci Birx, age-59, is single and has no dependents. Marci had the following relevant transactions for 2020:
Wages as Walmart greeter$17,000
Federal income tax withheld 2,260
Interest income from local bank 1,450
Qualified dividends 1,155
Loss on sale of Tandem Diabetic stock (held from
11/10/2017 to 10/31/2020) -3,100
Federal income tax quarterly deposits (total) 6,500
Charitable contributions 325
Itemized deductions 11,600
Single
Family
RENTAL OPERATIONS Home Duplex
Rental income $31,900 $29,200
Interest expense 11,800 11,200
Property taxes 1,650 6,366
Maintenance 440 560
Insurance 1,260 1.465
Depreciation-Building (Line 17, Form 4562) 2,495 1,491
Depreciation-Appliances (Line 17, Form 4562) 0 0
SALE OF RENTAL RESIDENCE
Sales price (November 27, 2020)
Land (line 2, Form 4797) $ 72,000
Building (line 19A, From 4797) 48,000
Cost (October 18, 2010)
Land $ 38,000
Building 40,000
Depreciation allowed (including 2019 depreciation) 8,898
SALE OF APPLIANCES WITH RESIDENCE See Daily 9, Problem D
Sales price (line 19B, From 4797) $ 2,500
Cost (October 18, 2014) 9,000
Depreciation allowed 9,000
Complete a Form 1040 with the appropriate Schedules and Forms for 2020 for Marci Birx.
Form 1040, Schedule 1, Schedule 3
Form 1040, Schedule B, Schedule D, Schedule E.
Form 4562, Form 4797, Form 8949 (Optional), Form 8995 (optional).
Hints:
Claim the QBI deduction for the rentals (i.e., the rentals qualify as a trade or business). Any depreciation recapture and any Sec. 1231 loss is included in QBI; any Sec. 1231 gain, is not.
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