Bob and Melissa Grant are married and live in Lexington, Kentucky. The Grants would like to file a joint tax return for the year. They have 19-year-old twin-daughters who still qualify as their dependents on the tax return. For this project, we assume that they do not claim any tax credits.
1. Taxable interest on Line 2b?
2. The phase-out percentage for the student loan interest deduction is 20, 40, 60, 80 or 100%?
3. 2021 Form 1040 Line 11 (Adjusted Gross Income)?
4. Schedule A, Line 15 Casualty and Theft Losses (All items are considered one event)?
5. Schedule-A Line 16 (Other Itemized Deductions)?
6. 2021 Form 1040 Line 15 (Taxable income)?
Individual Tax Return Project
Instructions:
Please complete the 2021 federal individual income tax return (Form 1040, Schedule 1 and Schedule A) for Bob and Melissa Grant. Stop after completing 1040 Line 16 (first line item on the second page of Form 1040) for this project. Submit and check your answers on D2L>Quizzes>Individual Tax Return.
Bob and Melissa Grant are married and live in Lexington, Kentucky. The Grants would like to file a joint tax return for the year. They have 19-year-old twin-daughters who still qualify as their dependents on the tax return. For this project, we assume that they do not claim any tax credits.
Bob Grant received the following during the year:
Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding
University of Kentucky $117,450 $22,000 $6,000
Melissa Grant received the following during the year:
Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding
Jensen Photography $20,500 $2,450 $1,025
All applicable and appropriate payroll taxes were withheld by Grants’ respective employers.
The Grants also received the following during the year:
Interest Income from First Kentucky Bank $580
Interest Income from City of Lexington, KY Bond $600
Interest Income from U.S. Treasury Bond $825
Disability insurance payments received by Bob on account of injury 3,000
Bob’s employer paid for the insurance policy issued by Aflac (NYSE AFL) as part of the tax-free fringe benefits
Payment to Melissa as a result of a lawsuit for damages she sustained in a car accident:
Reimbursement for her medical Expenses $14,500
Punitive Damages $10,000
Eight years ago, Melissa purchased an annuity contract for $80,000. This year, she received her first payment on the annuity. The payment amount was $16,000. The annuity started to pay on January 1 and she received a full first year’s payment. It will pay her $16,000 per year for ten years beginning this year.
In 2021, they also received $420 of Kentucky state income tax refund. They took itemized deduction in 2020 and the amount of their total itemized deduction in 2020 is $31,878. The total of their 2020 State and Local Taxes paid is $9,100.
The Grants also placed $455 in the Kentucky Derby and won $3,225 from their tickets.
The Grants paid or incurred the following expenses during the year:
Dental/Orthdontist (not paid by insurance) $ 23,000
Medical visits (not paid by insurance) 625
Prescriptions (not paid by insurance) 380
Real property taxes on residence 1,800
Mortgage interest on principal residence 8,560
Contribution to First Baptist Church of Kentucky (Qualified Charity) 7,000
Fee paid to Jones & Company, CPAs for tax preparation 200
In addition, Melissa paid $2,500 of interest on her student loan.
During the year, the Grants’ personal belongings were damaged by a federally declared disaster in September of the current year. All the items are considered damaged in one event.
Item Purchase Date Decline in FMV Tax Basis of Item Insurance Reimbursement Received
Laptop computer and Printer 09/01/2013 3,000 3,000 500
Rifle 03/01/2010 12,000 12,500 500
TV/Projector 03/01/2019 5,000 13,000 1,000
2010 Honda Pilot 07/01/2016 4,000 6,500 500
The Grants do not want to contribute to the Presidential Election Campaign and do not have any virtual currency.
Requirements:
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