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Unformatted text preview: Gross Income Solutions to Tax Return Problems 5-52 The treatment of the various items is discussed below. 1. David s salary of $70,000 is taxable and is reported on line 7 of Form 1040. The withholding is treated as a credit against the taxes owed and is reported on line 54 of Form 1040. 2. The $3,000 bonus is taxable as wages. The bonus is reported in the current year under the doctrine of constructive receipt. As a practical matter, the bonus should be included with the wages reported on his W-2. 3. The total sales price of the bond must be reduced by the $700 of interest accrued to the date of the sale. This interest is reported as interest income on line 8. The sale of the bond results in a capital loss of $1,000 ($9,000 Tax Return Problem 5-52 Form 1040 Department of the TreasuryInternal Revenue Service (99) IRS Use OnlyDo not write or staple in this space. U.S. Individual Income Tax Return 20 10 Name, Address, and SSN See separate instructions. P R I N T C L E A R L Y For the year Jan. 1Dec. 31, 2010, or other tax year beginning , 2010, ending , 20 OMB No. 1545-0074 Your first name and initial Last name Your social security number If a joint return, spouses first name and initial Last name Spouses social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Make sure the SSN(s) above and on line 6c are correct. City, town or post office, state, and ZIP code. If you have a foreign address, see instructions. Checking a box below will not change your tax or refund. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund . . . . . You Spouse Filing Status Check only one box. 1 Single 2 Married filing jointly (even if only one had income) 3 Married filing separately. Enter spouses SSN above and full name here. 4 Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this childs name here. 5 Qualifying widow(er) with dependent child Exemptions If more than four dependents, see instructions and check here 6a Yourself. If someone can claim you as a dependent, do not check box 6a . . . . . b Spouse . . . . . . . . . . . . . . . . . . . . . . . . } Boxes checked on 6a and 6b c Dependents: (1) First name Last name (2) Dependents social security number (3) Dependents relationship to you (4) if child under age 17 qualifying for child tax credit (see page 15) No. of children on 6c who: lived with you did not live with you due to divorce or separation (see instructions) Dependents on 6c not entered above d Total number of exemptions claimed . . . . . . . . . . . . . . . . ....
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- Spring '11