INDIVIDUAL TAX RETURN #3 Charlotte Brown
Required
• Use the following information to complete Charlotte Brown’s 2017 federal income tax
return. If information is missing, use reasonable assumptions to fill in the gaps.
• Any forms, schedules, and instructions can be found at the IRS Web Site (www.irs.gov).
The instructions can be helpful in completing the forms. AMT does not apply.
Facts:
1. Charlotte Brown (unmarried) is employed as an office manager at the main office of
Currier, Ellis & Acton Law firm. Charlotte lives in a home she purchased 15 years ago.
Charlotte lived in her home with her daughter Emily Brown and Charlotte’s younger
sister Anne for the entire year. Emily is disabled and receives $3,550 of income each
year housesitting for neighbors. Emily is able to save these funds because Charlotte
provides all of Emily’s support. Charlotte also provides all of the support for her sister
Anne Brown. Anne is a writer and sold her first book in 2017 and earned $5,000.
Charlotte provided the following additional information:
• Charlotte does not want to contribute to the presidential election campaign.
• Charlotte lives at 454 Pebble Hill Road, El Paso, TX 79904.
• Charlotte’s birthday is 2/18/1969 and her Social Security number is 544-67-0747.
• Emily’s birthday is 7/9/1996 and her Social Security number is 598-12-3668.
• Anne’s birthday is 3/14/1971 and her Social Security number is 564-97-1597
• Charlotte does not have any foreign bank accounts or trusts.
• Charlotte, Anne and Emily have health insurance.
2. Charlotte received a Form W-2 from Currier, Ellis & Acton Law Firm (her employer) that
contained the following information:
• Wages: $89,000
• Federal income tax withheld: 5,965
• Social Security tax withheld: 5,518
• Medicare tax withheld: 1,291
• State income tax withheld: 0
3. Charlotte received $450 municipal bond interest from City of El Paso Bonds, $400 in
interest from GECU, $120 in interest from Smith Barney, and $296 from her savings
account at Wells Fargo Bank. She also received a $6,430 dividend from Gingham Corp.
and an $815 dividend from Heathcliff Inc. Both dividends were qualified dividends.
4. Charlotte sold 2,500 shares of MoorWind stock for $19 a share on October 15, 2017.
She purchased the stock on June 12, 2009, for $11 a share. There was a commission
charge of $75 on the sale of these shares. She also sold 725 shares of LionsGate stock
for $22 a share on February 22, 2017. She purchased the stock for $62 a share on
October 2, 2016. Both of these sales were not reported to her on a 1099-B.
5. Charlotte’s father, Patrick died on August 20, 2015, leaving Charlotte his entire estate.
Included in the estate was Patrick’s house (115 Second Street, El Paso, TX 79901).
Patrick’s basis in the residence was $56,000. The fair market value of the residence on
August 20, 2015 was $165,000. Charlotte has held the property as a rental property
since she received it and has managed it herself, however she is not a real estate
professional. To compute the depreciation on the house, Charlotte has allocated
$15,000 of the property’s basis to the land and the remaining amount to the house. She
has depreciated the house using the MACRS rules and conventions applicable to
residential real estate. Charlotte has collected $1,000 per month all year for 2017. The
house was occupied during the entire year. She did not pay anyone that would require
form 1099 for work related to this house. She incurred the following expenses related
to the rental house during the year:
Property Insurance $1,750
Property Taxes $2,600
Maintenance $950
Depreciation To be computed
6. Charlotte loves horses and enjoys gambling when she has the chance. She won
$26,998 at the race track this year. She also went to Las Vegas this year and she lost
$36,965 playing blackjack. It cost $1,300 to travel to Las Vegas.
7. The following is a record of the medical expense that Charlotte paid during the year.
The amounts reported are amounts she paid in excess of insurance reimbursements.
Insurance premiums $9,200
Prescription medications 1,200
Prescription medications for Emily 600
Over-the-counter medications 350
Doctor and dentists visits 875
Eyeglasses 250
Physical therapy 865
8. Charlotte paid $15,200 in mortgage interest during the year to EPCU credit union. The
loan balance on her loan is $239,000. During the year, Charlotte also paid $8,000 in
real estate property taxes on this home and $3,270 real property taxes on a cabin she
owns in Cloudcroft, NM.
9. Charlotte contributed cash of $6,675 to Community Church during the year. Community
Church’s address is 333 Narrow Way, El Paso, TX 79905.
10. Charlotte paid $3,689 in Texas sales tax this year. She has kept all her receipts.
11. Charlotte paid $3,000 to Andrew Adult Daycare for Emily’s care while she was working.
Andrews Adult DayCare employer id# is 85-6587412. They are located at 9601 Durazno
Ave, El Paso, TX 79901
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