Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2015. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a local law firm. During 2017, he had the following receipts:
Salary $ 80,000Interest income— Money market account at Omni Bank $300 Savings account at Boone State Bank 1,100 City of Springfield general purpose bonds 3,000 4,400Inheritance from Daniel 60,000Life insurance proceeds 200,000Amount from sale of St. Louis lot 80,000Proceeds from estate sale 9,000Federal income tax refund (for 2016 tax overpayment) 700
Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2017. Logan also was the designated beneficiary of an insurance policy on Daniel's life with a maturity value of $200,000. The lot in St. Louis was purchased on May 2, 2012, for $85,000 and held as an investment. As the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2017, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.
Logan's expenditures for 2017 include the following:
Medical expenses (including $10,500 for dental) $11,500Taxes— State of Missouri income tax (includes withholdings during 2017) $3,200 Property taxes on personal residence 4,500 7,700Interest on home mortgage (Boone State Bank) 4,600Contribution to church (paid pledges for 2017 and 2018) 4,800
Logan and his dependents are covered by his employer's health insurance policy for all of 2017. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helen's implants. Helen is Logan's widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 5, 2017, upon the advice of his pastor, he prepaid his pledge for 2018.
Logan's household, all of whom he supports, includes the following:
Social Security NumberBirth DateLogan Taylor (age 48)123-45-678708/30/1969Helen Taylor (age 70)123-45-678001/13/1947Asher Taylor (age 23)123-45-678307/18/1994Mia Taylor (age 22)123-45-678402/16/1995
Helen receives a modest Social Security benefit. Asher, a son, is a full-time student in dental school and earns $4,500 as a part-time dental assistant. Mia, a daughter, does not work and is engaged to be married.
Using the Form 1040, Form 8949, Schedule A ,and Schedule D, compute Logan's income tax for 2017. Federal income tax of $5,500 was withheld from his wages. If Logan has any overpayment on his income tax, he wants the refund sent to him. Assume that the proper amounts of Social Security and Medicare taxes were withheld. Logan does not want to contribute to the Presidential Election Campaign Fund.
- Make realistic assumptions about any missing data.
- Enter all amounts as positive numbers except any losses. Use the minus sign to indicate a loss.
- If an amount box does not require an entry or the answer is zero, enter "0".
- It may be necessary to complete the other tax schedules before completing Form 1040.
- When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
What is the tax amount for line 44 on the 1040 tax form?