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Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer.

1. Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal).
2. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share.
3. Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000.
4. Ken received $13,000 in disability benefits for the year. He purchased the disability insurance policy last year.
5. Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and tuition, and he applied the rest toward his new car payment.
6. Kens son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,100.
7. Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $12,050 in itemized deductions last year (the standard deduction for a single filer was $12,000).
8. Ken received $30,000 of interest from corporate bonds and money market accounts.

Comprehensive Problem 5-75 Part 2

Complete page 2 of Form 1040, Line 1-6 and Form 1040, Schedule 1, Lines 1-22 for Ken.

(Input all the values as positive numbers. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement. Use 2019 tax laws.)

1040 for a single taxpayer.

• 1040 PG 2
• Schedule 1

Page 2 of Form 1040.

Form 1040 (2018) Page 2 Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 1 Wages, salaries, tips, etc. Attach Form W-2 1 2a Tax-exempt interest 2a b Taxable interest 2b 30,000 3a Qualified dividends 3a b Ordinary dividends 3b 4a IRAs, pensions, and annuities 4a 25,000 b Taxable amount 4b 14,500 5a Social security benefits 5a b Taxable amount 5b 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 2,200 6 46,700

Schedule 1 of Form 1040.

SCHEDULE 1 Additional Income and Adjustments to Income OMB No. 1545-0074 (Form 1040) 2018 Department of the Treasury Attach to Form 1040. Internal Revenue Service Go to www.irs.gov/Form1040 for instructions and the latest information. Attachment Sequence No. 01 Name(s) shown on Form 1040 Your social security number Ken Additional 19 b Reserved 1-9b Income 10 Taxable refunds, credits, or offsets of state and local income taxes 10 11 Alimony received 11 12 Business income or (loss). Attach Schedule C or C-EZ 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here checkbox unchecked1 of 1 13 1,000 14 Other gains or (losses). Attach Form 4797 14 15a Reserved 15b 16a Reserved 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F 18 19 Unemployment compensation 19 20a Reserved 20b 21 Other income. List type and amount gambling income 21 1,200 22 Combine the amounts in the far right column. If you dont have any adjustments to income, enter here and on Form 1040, line 6. Otherwise, go to line 23 22 2,200

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