Problem
Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. karl lives with Ashley, and she fully supports him. Bill spent 2021 traveling in Europe and was not a college student. He had gross income of $4,655 in 2021.
Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2021, and many of her expenses were not reimbursed by her health insurance.
Ashley owns Panda Enterprises, LLC (98-7654321), a data processing service that she reports as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2021 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses of $11,000 (all at restaurants), and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year.
Ashley has an extensive stock portfolio and has prepared the following analysis:
|
Stock
|
Number of Shares
|
Date Purchased
|
Date Sold
|
Per-Share Cost
|
Per-Share Selling Price
|
Total Dividends
|
|
Beige
|
10
|
10/18/2020
|
10/11/2021
|
$80
|
$74
|
$30
|
|
Garland
|
30
|
10/11/2014
|
10/11/2021
|
43
|
157
|
70
|
|
Peach
|
15
|
3/10/2021
|
8/11/2021
|
62
|
33
|
45
|
Note: Ashley received a Form 1099-B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2021, and these are both ordinary dividends and qualified dividends.
Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband (divorce finalized in June 2017). His Social Security number is 123-45-6788.
Ashley itemizes her deductions and provides the following information, which may be relevant to her return:
|
Item
|
Amount
|
Comment
|
|
Unreimbursed medical expenses for Ashley
|
$9,748
|
Does not include health insurance premiums.
|
|
State income taxes paid
|
1,830
|
|
|
Real property taxes on personal residence
|
3,230
|
|
|
Interest paid on home mortgage (Form 1098)
|
8,137
|
The loan is secured by the residence and was incurred when the home was purchased.
|
|
Charitable contributions
|
1,399
|
$940 cash payments to Ashley's church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expenditures.
|
|
Sales taxes
|
619
|
Amount per sales tax table.
|
Ashley paid $27,000 in estimated Federal income taxes, did not engage in any virtual currency transactions during the year, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2022 taxes. Ashley received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.
Compute Ashley's net tax payable or refund due for 2021. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 2, 3, A, C, D, and SE, Form 8949 and the Qualified Dividends and Capital Gain Tax Worksheet. Ashley qualifies for the § 199A deduction for qualified business income.