COMPREHENSIVE TAX RETURN PROBLEM \Text { Unreimbursed Medical Expenses Note:
[1] Antonia Kept the Award from the United Way

question 141

Essay

COMPREHENSIVE TAX RETURN PROBLEM. Your cousin, Antonia, who is 30 years old, single and a restaurant manager, heard that you have enrolled in the Masters of Taxation program at State University. She has asked you for help in preparing her 2018 tax return and provides you with the following information:
$\begin{array}{lr}\text { Salary } & \$ 50,000 \\\text { Alimony received (Pre-2018 agreement) } & 3,600 \\\text { Interest on GMAC Bonds } & 800 \\\text { Interest on City of New Orleans Bonds } & 1,300 \\\text { Interest on a bank savings account } & 600 \\\text { Berlinco, Inc. (a foreign corporation) (nonqualified dividend) } & 100 \\\text { Long-term capital gain } & 2,000 \\\text { Long-term capital loss } & (1,000)\\\text { Short-term capital gain } & 5,000 \\\text { Short-term capital loss } & (3,000) \\\text { Short-term capital loss carryover from } 2017 & (5,000) \\\text { Cash award from local United Way [1] } & 300 \\\text { Christmas turkey [2] } & 30 \\\text { Parking at office [2] } & 500 \\\text { Membership in professional organizations [2] } & 100 \\\text { Group term life insurance ( } \$ 40,000 \text { policy) [2] } &135\end{array}$
\text { Unreimbursed medical expenses:
$\begin{array}{lr}\text { Medical insurance premiums } & \$ 1,900 \\\text { Prescription drugs } & 250 \\\text { Dentist } & 2,250 \\\text { Emergency room fee } & 885 \\\text { Cold pills, aspirin, other over-the-counter medicine } & 120 \\\text { Rental fee for crutches } & 80\\\\\text { Real estate taxes } & \$ 1,600 \\\text { State income tax withheld } & 2,150 \\\text { State income tax paid in } 2018 \text { for } 2017 \text { tax return } & 150 \\\text { Home mortgage interest } & 4,800 \\\text { Home equity interest [3] } & 500 \\\text { Charitable contributions - cash } & 1,950 \\\text { Charitable contributions - clothes [4] } & \\\text { Tax preparation fee for 2017 return, paid in 2018 } & 300 \\\text { Unreimbursed business expenses [5] }&888\end{array}$
Note:
[1] Antonia kept the award from the United Way.
[2] Benefits paid by the employer.
[3] Antonia borrowed $12,000 and used the proceeds to purchase a new car.
[4] The original cost of the clothes was $480 and the current FMV is $200
[5] Of the $888 in expenses, $180 are for meals and entertainment.
Compute Antonia's: adjusted gross income, taxable income, and tax liability.

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Definitions:

Profit Increase

An rise in the difference between a business's revenues and its expenses, indicating improved financial performance.

Profit-Maximizing Output

The level of production at which a company achieves its highest profit, balancing revenue against costs.

Same Price

A situation where different goods, services, or commodities are sold for an identical amount of money.

Price Customers

Refers to consumers whose purchasing decisions are primarily influenced by the price of goods or services.