Taxation: Analyzing Mr. Lucis's 2018 Tax Liability Using Form 1040

This assignment provides a comprehensive analysis of Mr. Lucis's tax liability for the year 2018, utilizing the most favorable filing status. It includes a detailed computation based on the draft of Form 1040 and relevant schedules. The analysis covers various financial events and transactions, explaining their tax implications, such as the exchange of land for an apartment complex, rental income computation under Schedule E, and the treatment of IRA benefits. The assignment also addresses deductions for charitable gifts, insurance premiums, and business expenses, while excluding non-deductible items like personal use furnishings and wedding invitation costs. The computation considers the income from crafting boats as a business activity rather than a hobby, and it excludes expenses reimbursed by the son and tuition fees for a non-dependent relative. The document meticulously explains why each transaction does or does not have a tax effect, providing a clear understanding of the tax computation process.

TAXATION
Mr. Lucis shall file his tax return as head of household based on the following facts :
(a) He is a widower;
(b) He is paying more than 50% of his house expense;
(c) He has dependent for more than 6 months.
Further, he cannot file return under married status as his wife is dead and new marriage has
not yet crystallised by end of December.
In the present context, Mr. Lucis has disposed of a land in exchange of an apartment. Under
this transaction, the only event which is liable to Capital gain tax is the disposal of share and
that too for a long term capital gain.
Further, rental income shall be computed under Schedule E of Form 1040 which will be then
reflected in Schedule 1. Besides, the previous year losses and loss on disposal of equipment
has been considered as other expense while computing rental income. The part of furnishing
which is used for personal purpose has not been considered.
The engagement ceremony does entitle Mr. Lucis to file joint return.
In case of IRA benefit being receivable by Mr. Lucis, only that portion shall be tax exempt
which he has treated in his own account. Thus, only 5500 shall not be liable to tax rest 24500
shall be chargeable to tax.
Paying money for purchasing stake in a company is not a taxable event in IRS.
Inheritance of property from wife after death is not a taxable event in USA. Further,
commission paid shall be deductible while computing the true amount of capital gain or loss
for the purpose of computation of tax.
The pay check of $ 11650 shall be treated as other income for the purpose of computation of
taxable liability.
Interest on saving account shall be taxable in the hands of Mr. Lucis.
Donation made in cash shall be eligible for deduction under schedule A as Gifts to charity.
Further, shares gifted shall also be liable for deduction and the same shall be liable to CGT on
extinguishment.
Puchasing of new house is not eligible for deduction in USA.
Expenditure incurred for entertaining business contact has been considered other expense and
eligible for deduction. Further, expenditure on wedding invitation has not been considered.
Expenses reimbursed by son has not been considered under return for the purpose of
computation of tax liability.
Insurance premium paid has been considered under schedule A of the Form 1040 for the
purpose of computation of standard deduction
Income of Dominique has not been considered for the purpose of computing the tax liability.

Report your hobby income in form 1040 on Line 21 labelled as other income in schedule 1
but Luis hobby is crafting boat and luis use the same for personal purpose and afterwards sell
those boat and Luis maintain a meticulous record for the same so the income generated from
crafting the boat and selling the same will not be considered as income from hobby and will
be considered as part of his business activity. Further, Paying tution fees of Dominique son of
Luis is not eligible for deduction amount to $12,390 as Luis son is not dependant on Luis