Reference no: EM132017461
Prepare the 2017 Tax return for both Reba and Heather.
Reba Dixon's address is 1900 Ray Owens Rd. Appling, GA 30802
Social security numbers:
Reba Dixon:123-45-6789
Heather: 333-44-5555
Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2017. She is 45 years old and has been divorced for four years. She received $1,200 of alimony payments each month from her former husband. Reba also rents out a small apartment building. This year Reba received $30,000 of rental payments from tenants and she incurred the following expenses associated with the rental: Utilities $1,250; Mortgage Interest $3,000; Property taxes $1,100; Advertising $700; Management fees $1,500; Repairs $550.
Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather’s support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia. During the trip, Reba paid $200 for lodging and $85 for meals. Reba’s house hunting fees were $400 to find a place for them to live.
Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost. If possible, Reba thought it would be best to claim the education credit for these expenses.
Reba wasn’t sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $2,800 in state income taxes and $6,500 in charitable contributions during the year. She also gave away a sofa to St. Jude's hospital that is worth $8,000 and she paid $3,000 for it. She also paid the following medical-related expenses for her and Heather:
Insurance premiums $4,795
Medical care expenses $1,100
Prescription medicine $350
Nonprescription medicine $100
New contact lenses for Heather $200
Reba paid $3,250 in mortgage interest on her home in Colorado, which sold in November of this year for $450,000. She paid $250,000 for that house 15 years ago, her broker charged her 5% of the purchase price as commission. She also paid $4,120 in real estate taxes for the Colorado house.
Reba paid her accountant $400 to prepare her tax return last year. The school in GA required her to become a member of the union, so she ahd to pay $250 in union dues. She aslo got a safe deposit box at the local branch of the bank which cost her $75. Seh paid $300 for class room supplies (she teaches 3rd grade).
Shortly after the move, Reba got distracted while driving and she ran into a street sign. The accident caused $900 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Reba wasn’t able to work for two months after the accident. Fortunately, she received $2,000 from her disability insurance. Her employer, the Central Georgia School District, paid 60 percent of the premiums on the policy as a nontaxable fringe benefit and Reba paid the remaining 40 percent portion.
A few years ago, Reba acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,200 of interest income from corporate bonds and $1,500 interest income from City of Denver municipal bonds. Overall, Reba’s stock portfolio appreciated by $12,000. She sold all of the stock she bought in 2006, and she paid $10/share for 100 shares; she also sold 150 of the 650 shares she bought in 2010 for $9,750; she also sold 50 share of stock she bought in March 2017 for $5/share. She sold the stock for $27/share. Reba bought some stocks on margin interest, and has margin interest expense of $3,000; she sold the stocks and made $2,750.
Heather reported $3,200 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Heather’s only source of income for the year.
Reba had $10,000 of federal income taxes withheld by her employer. Heather made $500 of estimated tax payments during the year. Reba did not make any estimated payments. Reba had qualifying insurance for purposes of the Affordable Care Act.