ompute their net tax payable or refund appropriate tax rate schedule (not the Tax Tables). If you use tax forms for your computations, you will need at a minimum Form 1040 and Schedule D. Suggested software: ProConnect Tax Online.due for 2018, using the
Alton Newman, age 67, is married and files a joint return with his wife, Clair, age 65. Alton and Clair are
both retired, and during 2018, they received Social Security benefits of $10,000. Both Alton and Clair are
covered by Medicare. Alton’s Social Security number is 111-11-1119, and Clair’s is 123-45-6786. They
reside at 210 College Drive, Columbia, SC 29201.
Alton, who retired on January 1, 2018, receives benefits from a qualified pension plan of $2,750 a month
for life. His total contributions to the plan (none of which were deductible) were $168,250. In January
2018, he received a bonus of $2,000 from his former employer for service performed in 2017. No
income taxes were withheld on this bonus by his former employer (Amalgamated Industries, Inc.; EIN
12-3456789; 114 Main Street, Columbia, SC 29201). Although Amalgamated Indus-tries, Inc., accrued
the bonus in 2017, it was not paid until 2018.
Clair, who retired on December 31, 2017, started receiving benefits of $1,400 a month on January 1,
2018. Her contributions to the qualified pension plan (none of which were deductible) were $74,100.
On September 27, 2018, Alton and Clair received a pro rata 10% stock dividend on 600 shares of stock
they owned. They had bought the stock on March 5, 2011, for $20 a share. On December 16, 2018, they
sold the 60 dividend shares for $55 a share.
On October 10, 2018, Clair sold the car she had used in commuting to and from work for $17,000. She
had paid $31,000 for the car in 2012.
On July 14, 2010, Alton and Clair received a gift of 1,000 shares of stock from their son, Thomas.
Thomas’s basis in the stock was $35 a share (fair market value at the date of gift was $25). No gift tax
was paid on the transfer. Alton and Clair sold the stock on October 8, 2018, for $24 a share.
On May 1, 2018, Clair’s mother died, and Clair inherited her personal residence.
In February 2018, her mother had paid the property taxes for 2018 of $2,100. The residence had a fair
market value of $235,000 and an adjusted basis to the mother of $160,000 on the date of her death.
Clair listed the house with a real estate agent, who estimated it was worth $240,000 as of December 31,
2018.
Clair received rent income of $6,000 on a beach house she inherited three years ago from her uncle
Charles. She had rented the property for one week during the July 4 holiday and one week during the
Thanksgiving holiday. Charles’s adjusted basis in the beach house was $150,000, and its fair market
value on the date of his death was $240,000. Clair and Alton used the beach house for personal
purposes for 56 days during the year. Expenses associated with the house were $3,700 for utilities,
maintenance, and repairs; $2,200 for property taxes; and $800 for insurance. There are no mortgages on
the property.
Clair and Alton paid estimated Federal income tax of $2,000 and had itemized deductions of $6,800
(excluding any itemized deductions associated with the beach house). If they have overpaid their
Federal income tax, they want the amount refunded. Both Clair and Alton want $3 to go to the
Presidential Election Campaign Fund. Compute their net tax payable or refund appropriate tax rate schedule (not the Tax Tables). If you use tax forms for your computations, you will
need at a minimum Form 1040 and Schedule D. Suggested software: ProConnect Tax Online.due for 2018, using the
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