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Prepare a 1040 (schedules A, B, D, Form 3903) - Donna Harp

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Please see the attached PDF and assist with final preparation of the 1040 including schedules A, B and D and Form 3903. Please give step by step instructions as to where each transaction is applied in the process of preparing the returns so that I have a better clarification. Also please demonstrate the calculations on the gain on sale of residence for better clarification.

Thank you!

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** See the ATTACHED tax return as a .PDF **

There are two pages of worksheets included in the .PDF before you get to the actual forms.

Now for notes about calculations and amounts following the format of the tax return:

Schedule A:
1. The choice between sales tax and income tax was optimized with income tax being the larger amount. Even though she paid more in sales tax, the calculation for a sales tax deduction is based on family size and income level. The program calculated $1449 - less than the income tax paid.
2. Real estate taxes consist of $4100 + 1650 + 3600 = $9350. Her share of ...

Solution Summary

The solution presents a fully prepared tax return in pdf format together with a series of notes to explain the entries, the calculations and the tax law that applies. There are some optional treatments with the data as given.

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Tax forms: Donna Harp

At the beginning of the current year, Donna Harp was employed as a cinematographer by Farah Movie, Inc., a motion picture company in Los Angeles, California. In June, she accepted a new job with Ocala Production in Orlando, Florida. Donna is single and her Social Security number is 223-77-6793. She sold her house in California on August 10 for $500,000. She paid a $14,000 sales commission. The house was acquired on March 23, 1987, for $140,000.

The cost of transporting her household goods and personal effects from California to Orlando amounted to $2,350. To travel from California to Florida, she paid travel and lodging costs of $370 and $100 for meals.
On July 15, she purchased a house for $270,000 on 1225 Minnie Lane in Orlando. To purchase the house, she incurred a 20-year mortgage for $170,000. To obtain the loan, she paid points of $3,400. The $3,600 of property taxes for the house in Orlando were prorated with $1,950 being apportioned to the seller and $1,650 being apportioned to the buyer. In December of the current year she paid $3,600 for property taxes.

Other information related to her return:
Salary from Farah Movie, Inc. $30,000
Salary from Ocala Production, Inc. 70,000
Federal income taxes withheld by Farah 6,000
Federal income taxes withheld by Ocala 22,000
FICA taxes withheld by Farah 2,295
FICA taxes withheld by Ocala 5,355
Dividend income 10,000

Interest paid for mortgage:
Home in California 6,780
Home in Orlando 3,800
Property taxes paid in California 4,100
Sales taxes paid in California and Florida 3,125
State income taxes paid in California 2,900
Interest income from Sun National Bank 1,800

Prepare Form 1040 including Schedules A, B, and D and Form 3903. Use the worksheet on page 12-23 to determine the amount of recognized gain on the sale of the residence.

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