Spencer W. Duck is single and lives at*****in Ames, Iowa 86701. His eight-year-old son, Mitch, lives with him nine months of the year in Spencer’s rented condominium. Mitch lives with his mother, Daisy – Spencer’s ex-wife, during the summer months. His mother provides half of Mitch’s support and Spencer has agreed to allow her to claim Mitch as her dependent. Spencer has the following items pertaining to his 2014 Federal income tax return:
• Spencer is age 30 (SSN:###-##-####. Mitch is age 8. (SSN:###-##-####. Other than Mitch, Spencer has no children.
• As an information technology specialist, Spencer receives a $148,000 salary from his employer (World Electronics, LLC), who withheld $33,300 in federal income tax.
• He paid $27,000 in alimony to his ex-wife (Daisy, SSN:###-##-####.
• He received a state income tax refund in 2014 of $2,500 for state income taxes withheld in 2013. Last year (2013), he used the standard deduction when completing his 2013 Federal income tax return.
• In 2014, he had state income tax withheld from his wages of $3,500.
• Other items:
o Alcon Corporation bond interest: $6,600
o City of Drake bond interest $7,000
o Pear Corporation Dividend (qualified) $4,500
o South Lake Mutual Fund
? Capital Gain Distribution $700
? Ordinary Dividend (qualified) $950
• Gambling winnings from playing the slot machines: $15,000. Gambling losses – $2,000. Spencer’s nickname is “The Lucky Duck.”
• Spencer had the following capital asset transactions in 2014:
o On March 1, 2014, land was sold for $36,000. The land was received as a property settlement on January 10, 2009, when the land’s FMV was $32,000. His ex-wife’s basis for the land, purchased on January 10, 1991, was $28,500.
o A personal-use computer acquired on March 2, 2013 for $4,000 was sold for $1,580 on July 10, 2014.
o A membership card for a prestigious Ames City country club was sold for $10,500 on August 15, 2014. The card was acquired on October 10, 2003, for $6,000.
o On August 16, 2014,Spencer sells for $3,700 his 10 shares of York Corporation purchased as an investment on February 16, 2014 for $1,600. (No code for Form 8949 is applicable).
o On March 15, 2014, he sells for $6,500 an antique watch fob. The fob was a gift from his grandfather on January 10, 1998, when its FMV was $1,000. The fob was purchased by his grandfather on April 2, 1979 for $1,500.
o 10 shares of Texsun Industries, Inc. stock held as an investment were sold for $26,000 on December 5, 2014. The securities were inherited from his uncle, who died on April 10, 2014 when the fair market value of the securities was $19,000. The uncle purchased the securities on January 10, 2012, for $15,700. (No code for Form 8949 is applicable).
o He has a short-term capital loss carryover of $650 from last year.
• Mitch has interest income of $7,800 from a Bank of Ames certificate of deposit which his mother put in his name. Neither Spencer, Daisy nor Mitch want Mitch to file a separate tax return and elect to include the interest income on the appropriate parent’s tax return.
• Other than those items listed above, Spencer had no other itemized deductions. Spencer also has no foreign bank accounts nor other foreign assets or financial interests.
Complete Form 1040 and accompanying schedules for Spencer W. Duck’s Federal income tax return for the 2014 tax year. Use all rates, deductions, personal exemptions and dependency exemptions that are applicable for 2014. Ignore any penalties, but consider any applicable credits.
In filling out Form 8949, all transactions will have box (C) or (F) checked. There is no need to fill-out more than one Form 8949. The return should contain all information needed so that Spencer should be able to immediately sign the return and send it to the IRS when you present it to him.
Forms to use:
• Form 1040
• Schedule B (Form 1040)
• Schedule D (Form 1040)
• Form 8949
• Form 8814
• Tax computation worksheet
• Notes to tax return
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