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Required: 7. Paula manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year, Paula was awarded the Employee Safety Award on December 15. The cash award was $500 Use the following information to complete Paula Thompson's 2018 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps. 8. On January 15, 2018, Paula's father died. From her father's estate, she received stock valued at S30,000 (his basis was $12,000) and her father's house valued at S90,000 (his basis in the house was $55,000). Any required forms, schedules, and instructions can be found at the IRS website www.irs.gov). The instructions can be helpful in completing the forms. Facts: 9 Paula owns several other investments and in February 2019 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2018. EXHIBIT A Forms 1099 and 1098 This is important tax information and is being furnished to the Internal Revenue Service 1. Paula Thompson is single and has two children from her previous marriage. Ali lives with Paula, and Paula provides more than half of her support. Leif lives with his father, Will (Leif lived with Will for all of 2018). Will provides more than half of Leif's support. Paula provides you with the following additional information: She uses the cash method of accounting and a calendar year for reporting. She wishes to contribute to the presidential election campaign. Paula lives at 523 Essex Street, Bangor, Maine 04401 Paula's birthday is May 31, 1980. Ali's birthday is October 5, 2009. Leif's birthday is December 1, 2007 Paula's Social Security number is 007-XX-4727 Ali's Social Security number is 005-XX-7232. Leif's Social Security number is 004-XX-3419. Will's Social Security number is 006-XX-6333. She does not have any foreign bank accounts or trusts. Entity General Dynamics Gross qualified dividends $300 1099-Int Interest Entity Description Gross interest Gross interest Gross interest New Jensey Economic Development bonds IBM bonds State of Nebraska bonds $300 700 700 1098-Mortgage Interest Statement 2. Paula is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). ASCI's federal employer identification number is 79-1234466. Paula's pay stubs indicate that she had 7,230 withheld in federal taxes, $4,987 in state taxes, $4,495 in Social Security taxes, and S1,051 in Medicare taxes. ASCI has an extensive fringe benefits program for its employees. Entity $7.100 435 Sunbelt Credit Union Northeast Bank Mortgage interest Home-equity loan interest 3. Paula earned salary of $70,000 [before subtracting her 401(k) and flexible spending plarn contributions]. She contributed $7,000 to her 401(k) account, and she contributed $2,500 to her flexible spending account. Grubstake Mining &Development preliminary report (preliminary K-I) to Paige for the 2018 tax year 1,000 2,000 Distribution to shareholde Ordinary income ( 1% of S200000) 4. ASCI paid S397 of whole life insurance premiums to cover Paula's personal whole life insurance policy. ASCI also paid health club dues of $900 to a nearby health club on Paula's behalf 10. In addition to the investments discussed above, Paula owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding (S corp. ID number 45-4567890). Grubstake reported taxable income of $200,000 and paid a distribution of S1.00 per share during the current year. Paula tells you that Grubstake typically does not send out its K-1 reports until late April. However, its preliminary report has been consistent with the K-1for many years. (See Exhibit A.) Paula doe:s not materially participate in Grubstake's activities 5. Taking advantage of ASCI's educational assistance program, during the fall Paula enrolled in two graduate engineering classes at a local college. ASCI paid her tuition, fees, and other course-related costs of $2,300. 6. Paula received free parking in the company's security garage that would normally cost $200 per month. 11. Paula slipped on a wet spot in front of a computer store last July. She broke her ankle and was unable to work for two weeks. She incurred $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,000 for pain and suffering resulting from the injury. ASCI continued to pay her salary during the two weeks she missed because of the accident. ASCI's plan also paid her $1,200 in disability pay for the time she was unable to work. Under this plan ASCI pays the premiums for the disability insurance as a taxable fringe benefit. 15. Paula found a renter for her father's house on August 1. The monthly rent is 5400, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months rent and a $400 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On August 1, Paula received $1,200 from the tenant per the terms of the lease agreement. In November, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December, he reduced his rental payment to $100 to compensate for the plumbing repairs. Paula provides you with the following additional information for the rental in 2018: 12. Paula received a Form 1099-8 from her broker for the sale of the following securities during 2018. The adjusted basis amounts were reported to the IRS. $770 $285 $495 $350 Property taxes Other maintenance expenses Insurance expense Management fee Sales Price 0/22/12 $2,300 8,500 Her Basis $1,890 9,760 Paid on Sale Date 03/14/18 $160 425 Nebraska state bonds Cassill Corp (500 shares)10/20/18 (to be computed) 02/19/17 The rental property is located at 35 Harvest Street, Orono, Maine 04473. Local practice is to allocate 12 percent of the fair market value of the property to the land. (See item #8.) Paula makes all decisions with respect to the property. 13. In addition to the taxes withheld from her salary, Paula also made timely estimated federal tax payments of $175 per quarter and timely estimated state income tax payments of S150 for the first three quarters. The $150 fourth-quarter state payment was made on December 28, 2018. Paula would like to receive a refund for any overpayment. 16. Paula paid $2,050 in real estate taxes on her principal residence. The real estate tax is used to pay for town schools and other municipal services. 14. Because of her busy work schedule, Paula was unable to provide her accountant with the tax documents necessary for filing her 2017 state and federal income tax returns by the due date (April 17, 2018). In filing her extension on April 13, 2018, she made a federal tax payment of 5750. Her return was eventually filed on June 25, 2018. In August 2018, she received a federal refund of $180 and a state tax refund of $60. Her itemized deductions for 2017 were S12,430. 17. Paula drives a 2016 Acura TL. Her car registration fee (based on the car year) is $50 and covers the period 1/1/18 through 12/31/18. In addition, she paid $280 in property tax to the state based on the book value of the car 18. In addition to the medical costs presented in item #11, Paula incurred the following unreimbursed medical costs: 310 5390 5215 $140 Doctor Prescription drugs Over-the-counter drugs Emergency room charges LASIK eye surgery Chiropractor $440 $2,000 5265 19. On March 1, Paula took advantage of low interest rates and refinanced her $75,000 home mortgage with her original lender. Paula purchased the home in 2016. The new home loan is for 15 years. She paid $215 in closing costs and $1,500 in discount points (prepaid interest) to obtain the loan. The house is worth $155,000 and Paula's basis in the house is $90,000. As part of the refinancing arrangement, she also obtained a $10,000 home-equity loan. She used the proceeds from the home equity loan to reduce the balance due on her credit cards. Paula received several Form 1098 statements from her bank for interest paid by her in 2018. Details appear below commuting to and from the real estate office). In 2018, Paula elects to use the standard mileage method to calculate her car expenses. She spent $45 on tolls and $135 on parking related to the real estate business. 22. Paula has qualifying insurance for purposes of the Affordable Care Act (ACA). Primary home mortgage Home-equity loan Credit cards Car loan 57,100 $435 $498 5390 20. On May 14, 2018, Paula contributed clothing to the Salvation Army. The original cost of the clothing was $740. She has substantiation valuing the donation at S360. The Salvation Army is located at 350 Stone Ridge Road, Bangor, Maine 04401. In addition, she made the following cash contributions and received a statement from each of the following organizations acknowledging her contribution 850 125 790 $200 100 Larkin College United Way First Methodist Church Amos House (homeless shelter Local Chamber of Commerce 21. Paula sells real estate in the evening and on weekends (considered an active trade or business). She runs her business from a rental office she shares with several other realtors (692 River Road, Bangor, Maine 04401). The name of her business is Thompson Real Estate and the federal identification number is 05-8799561. Her business code is 531210. Paula has been operating in a business-like way since 2007 and has always shown a profit. She had the following income and expenses f rom her business: Commissions earned $21,250 Expenses: Advertising Telephone Real estate license Rent Utilitie 52,200 595 $130 56,000 $600 Paula has used her Acura TL in her business since July 1, 2018. During 2018, she properly documented 6,000 business miles (1,000 miles each month). The total mileage on her car (i.e., for both business and personal use) during the year was 15,000 miles (including 200 miles Required: 7. Paula manages the safety program for ASCI. In recognition of her superior handling of three potential crises during the year, Paula was awarded the Employee Safety Award on December 15. The cash award was $500 Use the following information to complete Paula Thompson's 2018 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps. 8. On January 15, 2018, Paula's father died. From her father's estate, she received stock valued at S30,000 (his basis was $12,000) and her father's house valued at S90,000 (his basis in the house was $55,000). Any required forms, schedules, and instructions can be found at the IRS website www.irs.gov). The instructions can be helpful in completing the forms. Facts: 9 Paula owns several other investments and in February 2019 received a statement from her brokerage firm reporting the interest and dividends earned on the investments for 2018. EXHIBIT A Forms 1099 and 1098 This is important tax information and is being furnished to the Internal Revenue Service 1. Paula Thompson is single and has two children from her previous marriage. Ali lives with Paula, and Paula provides more than half of her support. Leif lives with his father, Will (Leif lived with Will for all of 2018). Will provides more than half of Leif's support. Paula provides you with the following additional information: She uses the cash method of accounting and a calendar year for reporting. She wishes to contribute to the presidential election campaign. Paula lives at 523 Essex Street, Bangor, Maine 04401 Paula's birthday is May 31, 1980. Ali's birthday is October 5, 2009. Leif's birthday is December 1, 2007 Paula's Social Security number is 007-XX-4727 Ali's Social Security number is 005-XX-7232. Leif's Social Security number is 004-XX-3419. Will's Social Security number is 006-XX-6333. She does not have any foreign bank accounts or trusts. Entity General Dynamics Gross qualified dividends $300 1099-Int Interest Entity Description Gross interest Gross interest Gross interest New Jensey Economic Development bonds IBM bonds State of Nebraska bonds $300 700 700 1098-Mortgage Interest Statement 2. Paula is employed as a nuclear engineer with Atom Systems Consultants, Inc. (ASCI). ASCI's federal employer identification number is 79-1234466. Paula's pay stubs indicate that she had 7,230 withheld in federal taxes, $4,987 in state taxes, $4,495 in Social Security taxes, and S1,051 in Medicare taxes. ASCI has an extensive fringe benefits program for its employees. Entity $7.100 435 Sunbelt Credit Union Northeast Bank Mortgage interest Home-equity loan interest 3. Paula earned salary of $70,000 [before subtracting her 401(k) and flexible spending plarn contributions]. She contributed $7,000 to her 401(k) account, and she contributed $2,500 to her flexible spending account. Grubstake Mining &Development preliminary report (preliminary K-I) to Paige for the 2018 tax year 1,000 2,000 Distribution to shareholde Ordinary income ( 1% of S200000) 4. ASCI paid S397 of whole life insurance premiums to cover Paula's personal whole life insurance policy. ASCI also paid health club dues of $900 to a nearby health club on Paula's behalf 10. In addition to the investments discussed above, Paula owns 1,000 shares of Grubstake Mining & Development common stock. Grubstake is organized as an S corporation and has 100,000 shares outstanding (S corp. ID number 45-4567890). Grubstake reported taxable income of $200,000 and paid a distribution of S1.00 per share during the current year. Paula tells you that Grubstake typically does not send out its K-1 reports until late April. However, its preliminary report has been consistent with the K-1for many years. (See Exhibit A.) Paula doe:s not materially participate in Grubstake's activities 5. Taking advantage of ASCI's educational assistance program, during the fall Paula enrolled in two graduate engineering classes at a local college. ASCI paid her tuition, fees, and other course-related costs of $2,300. 6. Paula received free parking in the company's security garage that would normally cost $200 per month. 11. Paula slipped on a wet spot in front of a computer store last July. She broke her ankle and was unable to work for two weeks. She incurred $1,300 in medical costs, all of which were paid by the owner of the store. The store also gave her $1,000 for pain and suffering resulting from the injury. ASCI continued to pay her salary during the two weeks she missed because of the accident. ASCI's plan also paid her $1,200 in disability pay for the time she was unable to work. Under this plan ASCI pays the premiums for the disability insurance as a taxable fringe benefit. 15. Paula found a renter for her father's house on August 1. The monthly rent is 5400, and the lease agreement is for one year. The lease requires the tenant to pay the first and last months rent and a $400 security deposit. The security deposit is to be returned at the end of the lease if the property is in good condition. On August 1, Paula received $1,200 from the tenant per the terms of the lease agreement. In November, the plumbing froze and several pipes burst. The tenant had the repairs made and paid the $300 bill. In December, he reduced his rental payment to $100 to compensate for the plumbing repairs. Paula provides you with the following additional information for the rental in 2018: 12. Paula received a Form 1099-8 from her broker for the sale of the following securities during 2018. The adjusted basis amounts were reported to the IRS. $770 $285 $495 $350 Property taxes Other maintenance expenses Insurance expense Management fee Sales Price 0/22/12 $2,300 8,500 Her Basis $1,890 9,760 Paid on Sale Date 03/14/18 $160 425 Nebraska state bonds Cassill Corp (500 shares)10/20/18 (to be computed) 02/19/17 The rental property is located at 35 Harvest Street, Orono, Maine 04473. Local practice is to allocate 12 percent of the fair market value of the property to the land. (See item #8.) Paula makes all decisions with respect to the property. 13. In addition to the taxes withheld from her salary, Paula also made timely estimated federal tax payments of $175 per quarter and timely estimated state income tax payments of S150 for the first three quarters. The $150 fourth-quarter state payment was made on December 28, 2018. Paula would like to receive a refund for any overpayment. 16. Paula paid $2,050 in real estate taxes on her principal residence. The real estate tax is used to pay for town schools and other municipal services. 14. Because of her busy work schedule, Paula was unable to provide her accountant with the tax documents necessary for filing her 2017 state and federal income tax returns by the due date (April 17, 2018). In filing her extension on April 13, 2018, she made a federal tax payment of 5750. Her return was eventually filed on June 25, 2018. In August 2018, she received a federal refund of $180 and a state tax refund of $60. Her itemized deductions for 2017 were S12,430. 17. Paula drives a 2016 Acura TL. Her car registration fee (based on the car year) is $50 and covers the period 1/1/18 through 12/31/18. In addition, she paid $280 in property tax to the state based on the book value of the car 18. In addition to the medical costs presented in item #11, Paula incurred the following unreimbursed medical costs: 310 5390 5215 $140 Doctor Prescription drugs Over-the-counter drugs Emergency room charges LASIK eye surgery Chiropractor $440 $2,000 5265 19. On March 1, Paula took advantage of low interest rates and refinanced her $75,000 home mortgage with her original lender. Paula purchased the home in 2016. The new home loan is for 15 years. She paid $215 in closing costs and $1,500 in discount points (prepaid interest) to obtain the loan. The house is worth $155,000 and Paula's basis in the house is $90,000. As part of the refinancing arrangement, she also obtained a $10,000 home-equity loan. She used the proceeds from the home equity loan to reduce the balance due on her credit cards. Paula received several Form 1098 statements from her bank for interest paid by her in 2018. Details appear below commuting to and from the real estate office). In 2018, Paula elects to use the standard mileage method to calculate her car expenses. She spent $45 on tolls and $135 on parking related to the real estate business. 22. Paula has qualifying insurance for purposes of the Affordable Care Act (ACA). Primary home mortgage Home-equity loan Credit cards Car loan 57,100 $435 $498 5390 20. On May 14, 2018, Paula contributed clothing to the Salvation Army. The original cost of the clothing was $740. She has substantiation valuing the donation at S360. The Salvation Army is located at 350 Stone Ridge Road, Bangor, Maine 04401. In addition, she made the following cash contributions and received a statement from each of the following organizations acknowledging her contribution 850 125 790 $200 100 Larkin College United Way First Methodist Church Amos House (homeless shelter Local Chamber of Commerce 21. Paula sells real estate in the evening and on weekends (considered an active trade or business). She runs her business from a rental office she shares with several other realtors (692 River Road, Bangor, Maine 04401). The name of her business is Thompson Real Estate and the federal identification number is 05-8799561. Her business code is 531210. Paula has been operating in a business-like way since 2007 and has always shown a profit. She had the following income and expenses f rom her business: Commissions earned $21,250 Expenses: Advertising Telephone Real estate license Rent Utilitie 52,200 595 $130 56,000 $600 Paula has used her Acura TL in her business since July 1, 2018. During 2018, she properly documented 6,000 business miles (1,000 miles each month). The total mileage on her car (i.e., for both business and personal use) during the year was 15,000 miles (including 200 miles