Use the following information to complete a 1040 for Kyle and Ariana Bruney for 2023

Question

forms are available at www.irs.gov. Show the 1040 and any supporting schedules and forms. You do not need to complete the State tax return or any tax returns for dependents. You do not need to create W-2, 1099-DIVs.

Kyle and Ariana live at 7043 carrion BLVD, Cook County, Illinois 60018. Kyle is employed as a supervisor by a local insurance firm, Slate Pharm. Ariana is a substitute teacher at Parkside Elementary. During the current year, the Bruney’s had the following receipts:

Salary: 126,000

Interest income from a money market account (reported on a 1099-INT

from 1st National Bank): 1,400

Interest income from City of Denver bonds: 3,000

Dividends (ordinary): 425

Proceeds from sale of developed land: 75,000

Kyle sold the developed land on June 1. He originally paid $68,000 for the land on March 10 ofthis year.

The Burney’s household, all of whom Kyle and Ariana support, includes the following:

Kyle Burney (age 50) 123-45-6787 8/30/1972

Ariana Burney (age 48) 123-45-2020 10/20/1973

Sara Burney (age 71) 123-45-6780 1/13/1950

Bob Burney (age 23) 123-45-6767 11/17/1998

Kelsey Burney (age 21) 123-45-6783 4/16/2001

Maddy Burney (age 15) 123-45-6784 5/14/2006

Kyle and Ariana’s expenses for the year include the following:

Medical expenses: 5,890

Dental expenses for Sara: 5,000

Taxes: State of Illinois income tax: 6,235

Taxes: Property taxes on personal residence: 4,900

Interest on home mortgage: 4,600

Cash contributions to local charities: 13,200

Tuition paid to Illinois State University for Kelsey: 9000

Student loan interest paid 1,800

IRA contributions 5,500

The Burney family is covered by Kyle’s employer’s health insurance policy. However, they are subject to a deductible, and dental care is not included. The dental expenses listed above include dental charges for Sara, Kyle’s widowed mother, who lives with them. Ariana contributes $5,500 to an IRA. She is not covered by a retirement plan as a substitute teacher. Sara’s only source of income is her Social Security benefits.

Bob is completing his degree at WIU as a full-time student after serving overseas in the Army for four years following high school graduation.

Kelsey is a full-time student at WIU and earns $4,500 at her part-time job on campus.

Maddy worked at Carl’s in the summer and made $2,600.

Kyle and Ariana had $7,500 withheld for Federal income tax for the year.

Answer 1

1. Basic Information

Taxpayers:

1. Kyle Bruney SSN 123-45-6787, DOB 8/30/1972
2. Ariana Bruney SSN 123-45-2020, DOB 10/20/1973
3. Address: 7043 Carrion Blvd, Cook County IL 60018
4. Filing Status: Married Filing Jointly

Dependents (qualifying household members)

NameAgeRelationshipStudent?IncomeQualifies as dependent?
Sara Bruney	71	Mother of Kyle	No	Only Social Security	Yes (Qualifying relative)
Bob Bruney	23	Son	Full-time student (veteran)	$0	Yes (Qualifying child, under 24 and FT student)
Kelsey Bruney	21	Daughter	Full-time student	$4,500	Yes (Qualifying child)
Maddy Bruney	15	Daughter	High school student	$2,600	Yes (Qualifying child)

Total dependents = 4.

2. Income (Form 1040 lines 1–8)

DescriptionAmountNotes
Wages (Slate Pharm & Parkside)	$126,000	Form W-2 (estimate combined)
Taxable Interest (1st National)	1,400	Taxable interest
Tax-Exempt Interest (City of Denver bonds)	3,000	Reported on 1040 line 2a (not taxable)
Ordinary Dividends	425	Line 3b
Short-term capital gain on land sale	7,000	(75,000 – 68,000) held < 1 yr → short-term

Total Income: 126,000 + 1,400 + 425 + 7,000 = $134,825

3. Adjustments to Income (Schedule 1, Part II)

AdjustmentAmountLine Ref
Educator expense – none	–
IRA contribution (Ariana)	5,500	Deductible; not covered by plan
Student loan interest	1,800	Limited to $2,500 → fully deductible

Adjustments = $7,300

Adjusted Gross Income (AGI) = 134,825 – 7,300 = $127,525

4. Itemized Deductions (Schedule A)

CategoryAmountNotes
Medical + Dental	10,890	(5,890 + 5,000) – 7.5% AGI limit (0.075×127,525 = 9,564) → 1,326 deductible
State income tax	6,235
Property tax	4,900
SALT limit	≤ 10,000 → 10,000
Home mortgage interest	4,600
Charitable contributions	13,200	cash
Total Itemized Deductions	1,326 + 10,000 + 4,600 + 13,200 = $29,126

Standard deduction for MFJ in 2023 = $27,700 → itemizing is better.

5. Taxable Income

AGI 127,525 – Deductions 29,126 = Taxable Income $98,399

6. Tax Before Credits (1040 line 16)

2023 MFJ tax brackets:

10% on 22,000 = 2,200

12% on (98,399 – 22,000)= 76,399×0.12 = 9,168

Total tax ≈ $11,368

7. Credits

Child Tax Credit / Other Dependents

DependentTypeCredit
Maddy (15)	Child < 17	$2,000
Kelsey (21 FT student)	Other Dependent	$500
Bob (23 FT student)	Other Dependent	$500
Sara (71)	Other Dependent	$500

Total credits = $3,500

Tax after credits = 11,368 – 3,500 = $7,868

8. Payments and Withholding

Federal income tax withheld = $7,500

9. Refund or Amount Owed

Tax 7,868 – Withheld 7,500 = $368 owed.

10. Supporting Schedules Used

FormPurposeKey Entries
1040	Main return	Lines 1-25 as above
Schedule A	Itemized deductions	Medical 1,326 • SALT 10,000 • Interest 4,600 • Gifts 13,200 → Total 29,126
Schedule B	Interest & Dividends	1st National Bank $1,400; Denver bonds $3,000 (Tax-Exempt); Dividends $425
Schedule D + Form 8949	Land sale	Short-term gain $7,000
Schedule 1	Adjustments	IRA $5,500 • Student loan $1,800
Schedule 8812	Credits for Dependents	$3,500 total

Summary of Key 1040 Lines (2023)

LineDescriptionAmount
1	Wages	126,000
2a	Tax-exempt interest	3,000
2b	Taxable interest	1,400
3b	Ordinary dividends	425
7	Capital gain	7,000
9	Total income	134,825
10	Adjustments	7,300
11	AGI	127,525
12	Itemized deductions	29,126
15	Taxable income	98,399
16	Tax	11,368
19	Child & other dep credits	–3,500
24	Total tax	7,868
25d	Federal tax withheld	7,500
37	Amount you owe	368

Final Answer (summary):

1. Form 1040 — Married Filing Jointly
2. AGI: $127,525
3. Itemized Deductions: $29,126
4. Taxable Income: $98,399
5. Tax: $7,868
6. Credits: $3,500
7. Withholding: $7,500
8. Balance Due: $368