Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2012. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a...

Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2012. He lives at

4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a

local law firm. During 2014, he reported the following receipts.

Salary $ 80,000

Interest income

Money market account at Omni Bank $ 300

Savings account at Bosne State Bank 1,100

City of Springfield general purpose bonds 3,000 4,400

Inheritance from Daniel 60,000

Life insurance proceeds 200,000

Amount from sale of St. Louis lot 80,000

Proceeds from estate sale 9,000

Federal income tax refund (for 2013 tax overpayment) 700

Logan inherited securities worth $60,000 from his uncle, Daniel, who died

in 2014. 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, 2009, 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, 2014, 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 other 2014 expenditures include the following.

Medical expenses (including $10,500 for dental services) $11,500

Taxes

State of Missouri income tax (includes withholdings) $3,200

Property taxes on personal residence 4,500 7,700

Interest on home mortgage 4,600

Contribution to church (paid pledges for 2014 and 2015) 4,800

Logan and his dependents were covered by his employer's health insurance policy for all of 2014. 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, 2014, upon the advice

of his pastor, he prepaid his pledge for 2015.

Logan's household, all of whom he supports, includes the following.

Social Security Number Birth Date

Logan Taylor (age 48) 123-45-6787 08/30/1966

Helen Taylor (age 70) 123-45-6780 01/13/1944

Asher Taylor (age 23) 123-45-6783 07/18/1991

Mia Taylor (age 22) 123-45-6784 02/16/1992

Helen, Logan's mother, 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.

Part 1Tax Computation

Using the appropriate forms and schedules, compute Logan's 2014 Federal income

tax. 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. Suggested software: H&R BLOCK Tax Software.

Tax Return Problem

Decision Making

Communications

3-46 PART 1 Introduction and Basic Tax Model

Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).

Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.For the latest in changes to tax legislation, visit www.cengagebrain.com.Part 2Follow-Up AdviceIn early 2015, the following events take place.Helen decides that she wants to live with one of her daughters and moves toArizona.Asher graduates from dental school and joins an existing practice in St. Louis.Mia marries, and she and her husband move in with his parents.Using the insurance proceeds he received on Daniel's death, Logan pays off themortgage on his personal residence.Logan believes that these events may have an effect on his tax position for 2015.Therefore, he requests your advice.Write a letter to Logan explaining in general terms how the 2015 events will affecthis Federal income tax liability. Assume that Logan's salary and other factors notmentioned (e.g., property and state income taxes) will remain the same. Use theTax Rate Schedules in projecting Logan's tax for 2015.