Reference no: EM132930927

Case - Clara Morrish

1. What is Clara's federal income tax filing status for 2019, 2020, 2021, and 2022?

2. On November 1, 2020, Clara decides to sell her personal residence for the fair market value as of January 1, 2020. What will be her tax consequences? Disregard the vacation home.

3. Clara will attain age 72 in 2023. If she elects to take a distribution from Tim's profit- sharing plan in 2023, to what extent will she be required to include it in her gross income?

4. How should Clara report the income and expenses from her jewelry business for 2019?

5. Ten years ago, Tim and Clara gave their grandchildren stock in a U.S. domestic corpora- tion that is publicly traded. Because of an important advance in technology in the last year, the company is growing rapidly and in 2020 it pays $3,000 in qualified dividends to each child. What are the kiddie tax implications of the dividends on the income of the grandchildren in 2020? To their parents (assume a marginal tax rate of 22%)? To Clara?

6. Rather than let the vacation home sit unused during Tim's last illness, Tim and Clara rented it to vacationers for 180 days in 2019. However, Clara used her vacation home for the last 40 days of the year after Tim's death in 2019. The only expenses for the home were utilities, taxes, and maintenance. How much of these expenses may she deduct? Where does she report the income and expenses on her tax return in 2019?

7. How much of Tim's IRA must Clara include in taxable income in 2019?

8. How much of Clara's Social Security is taxable in 2020?

9. What is Clara's gross income in 2020?

10. Assume that in 2021, Clara decides to sell the stock she inherited from Tim that now has a fair market value of $24,000. She directs the broker to make the check payable to her sons, George and Vince, because she does not need the extra income from the sale. What are the tax consequences to Clara, George, and Vince as a result of this stock sale in the year of the sale?

11. A thief entered Clara's home on New Year's Day in 2020 while she was away from home and stole an antique gun that had been one of Tim's treasures that he had pur- chased for $3,500. Unfortunately, while Clara had the gun appraised after Tim's death, she did not specifically insure it and only recovered $200 for the gun that had been val- ued at $4,500. Assuming her AGI is the same in 2020 as in 2019, how much may Clara claim as a casualty loss on her tax return for 2020?

12. Assume that Clara's best friend, Marlene, who is 67 and legally blind, is in poor health and has only a meager Social Security income of $3,250 annually. Clara invited her to live with her beginning January 1, 2020, and is providing more than 50% of her total support. Assuming her AGI is the same in 2020 as in 2019, how will this affect Clara's tax return in 2020?

120 Personal Financial Planning: Cases & Applications Textbook 11th Edition 2020

13. Sarah, Clara's granddaughter, has a qualified tuition plan (QTP) currently valued at
$195,000. Contributions from various family members were $145,000 over the years. Sarah has the following expenses for her first year at the university:

Tuition	$20,000
Room and board	$ 4,000
University fees	$     900
Books for classes	$     600
Laptop required by the university	$ 2,500
Auto to use on campus	$11,000
Total 1st year expense	$39,000

If Sarah pays for all of her expenses using a distribution from her qualified tuition plan, what effect does it have on her gross income?

14. On April 2, 2020, Clara received a refund of $4,800 from the hospital where Tim died. She had paid the hospital $5,600 late in the prior year for the medical bill and planned to add the expense to the rest of the unreimbursed medical expenses from Tim's death. Her son, Vince, told her to allow the estate to reimburse her when she paid the bill, but Clara chose to forego reimbursement. Faced with the check from the hospital, Clara fears she may have made a mistake in how she handled the expense. She consults her financial planner about the $4,800 refund. The 2019 income tax return has not been filed. How should the financial planner advise Clara?

15. geGaenodr Kathy vacationed in Guatemala in 2018 and after a visit to a local orphan - age, decided to adopt a three-year-old little boy. George and Kathy felt their annual AGI of $260,000 could adequately provide for another child and that their time and cost would be greatly rewarded. Sarah is excited about her new little brother and looks forward to his arrival in the US. In February 2019, Marcus came to live with the family and his adoption became final in August 2020. The couple incurred qualified adoption costs in 2019 of $9,000 and an additional $7,500 in 2020. How much of an adoption credit can the couple use on their income tax return in 2020? Assume they file MFJ.

16. Clara is considering selling the vacation home she inherited from her mother. Her mother paid $75,000 for the home 20 years before she died and Clara inherited it. If Clara sells it today for its full fair market value of $200,000, how much would her taxable gain be on the sale of the house?

17. Assume a forest fire destroyed Clara's mountain vacation retreat in May 2020. Clara's basis in the property is $125,000. The insurance company paid Clara $226,000 in July 2020 to rebuild. Clara decided not to rebuild in such a remote area and bought a vaca- tion home near a lake in November 2022 for $220,000. How should Clara treat the gain, if any, on this involuntary conversion?

Note: Need Complete Questions 1, 2, 3, 4, 6, 7, 9, 10, 12, 16 and 17 Only

Attachment:- Clara Case.rar