Posted: February 23rd, 2022

Income Tax Return Project Help

Tax Return Project

The goal of this assignment for you to 1.) determine the Taxpayers’ AGI, taxable income, tax liability and tax due/refund and 2.) to identify where the income and expense items are reported on an individual tax return. It is important for you to understand how all the “pieces” we have discussed this semester fit together

Instructions:

Please download the spreadsheet from Blackboard. The tabs at the bottom correspond to the different forms needed for this return. Please complete the worksheets. You need to fill in all yellow and pink boxes. You must show your calculations and label your work. Each person is to submit their completed spreadsheet on Blackboard by end of day (midnight) Tuesday, December 1, 2020.

Note:  You are preparing the 2019 return for your clients as not all of the 2020 tax forms and schedules have been released at this point.

Client Info:

Steven and Lucy Gonzales

Filing status = Married filing jointly

Qualifying children = Sam (age 4) and Charlie (age 6)

2019 Tax Information:

a.)  Steven is a pilot and is employed by Flyby Airlines.  His W-2 provided the following information: Line 1 Wages, tips & other compensation                                                          $163,000

Line 2 Federal income tax withheld                                          $ 25,000

b.)  Lucy is self-employed and runs a bookkeeping business.  The income statement is attached.

c.) Steven won $8,000 at the casino in Ruidoso.

d.) Interest income – $250 from savings account at First Lubbock Bank; $300 from State of Texas Bond; $130 from US Treasury Bond; $1,800 from CD however CD was cashed out early and a 10% penalty of $180 was assessed

e.)         Dividend income – $2,750 ordinary dividends from TXT Co of which $2,500 was qualified f.)                Steven and Lucy own a rental property in Port Aransas, TX. They received $9,000 in rental

revenue and incurred the following expenses: Property taxes – $5,400

Repairs & Maintenance – $3,200 Utilities – $2,400

Depreciation – $1,600

g.)           Lucy received stock in Under the Bus Corp. when her grandmother died in February. Her grandmother had purchased the stock in 1992 for $5,000. The FMV of the stock was $22,000 on the date of her death. Lucy sold the sold in December for $27,000. (This transaction is not included in the table provided at p.).)

h.) Steven received $25,000 cash from his great-uncle has a gift.

i.)            Steven paid $10,000 in alimony to a former spouse and $24,000 in child support. (Steven’s children from his first marriage are claimed as dependents on their mother’s tax return. The kids from his first marriage are different than those in the opening sentence. Steven has four total children, but only two qualify as his dependents.) The divorce was finalized in 2011.

j.)            The taxpayers sold their boat (personal-use) that they had owned for three years at a loss of ($6,000).

k.)           Steven and Lucy won a free trip to Mexico after completing a survey outside the grocery store.

They were told the trip was worth $7,800.

l.)            In 2018 the taxpayers were required to file a state tax return in New Mexico due to some investment property. In 2019 they received a state tax refund of $550. The taxpayers itemized on their 2018 federal income tax return. Their total itemized deductions in 2018 exceeded the standard deduction by $3,500.

m.)         In 2015 the taxpayers won $100,000 in the McDonald’s Monopoly game. The winnings are paying out over five years ($20,000 per year). This year the couple received $20,900.

n.)          Lucy is a limited partner (passive) in two different partnerships – X and Z.  Partnership X reported her share of the current year income/loss to be ($17,000) and her basis prior to the current year loss was $14,000. Partnership Z reported her share of the current year income/loss to be $12,500 and his basis prior to the current year income was $7,000.

o.)          In January Lucy’s father passed away. Lucy was the recipient of one of his life insurance policies. The policy had a face value of $500,000. Lucy elected to have the policy pay out over 20 years. Lucy received a check for $26,000 in December.

Asset Purchased Sold Cost Basis Sales Price Gain/Loss ABC Stock 1/1/2019 7/1/2019 $18,000 $25,000 $7,000 DEF Stock 1/1/2008 11/20/2019 $15,000 $10,000 ($5,000) Painting (collectible) 1/1/2005 7/15/2019 $5,000 $50,000 $45,000 GHI Stock 1/1/2010 9/1/2019 $18,000 $30,000 $12,000 Rental Property* 1/1/2005 1/1/2019 $75,000 $130,000 $55,000 JKL Stock 1/1/2015 10/1/2019 $10,000 $15,000 $5,000

p.)          Additionally, the couple sold the following assets during the year:

*Unrecaptured Sec. 1250 gain = $27,000 (The $27,000 is included in the $55,000) q.) Paid the following out-of-pocket expenses during the year:

Medical expenses (unreimbursed):

• Doctor/hospital/dentist                                $9,500
• Prescription drugs                                            $800
• Over-the-counter drugs                                $200
• Wheelchair                                                         $150
• Veterinarian’s fees (non-service animal) $700
• Cosmetic surgery (elective)                         $12,000

Taxes:

• Teeth whitening                                               $2,500
• Lasik eye surgery                                              $6,000
• Braces (orthodontics)                                     $5,000
• Steven was injured in an automobile accident and became wheel-chair bound during the year. The taxpayers’ spent $10,000 making their home more accessible by adding ramps and widening doorways. The changes did not increase the home’s FMV. Additionally the couple put a pool in the backyard so Josh could do his physical therapy. The cost of the pool was $50,000. A local realtor determined the pool increase the home’s FMV by $42,000.

• Social security tax withheld from wages $8,500

	State general sales tax (per IRS table)	$2,200
	Real estate tax (investment property)	$2,500
	Estimated tax payments (federal)	$6,000
	Real estate tax (primary residence)	$5,800
Interest:
	Credit card (personal)	$400
	Home mortgage (personal) (Note = $350,000)	$7,500
	Auto loan (personal)	$1,500
	Points paid on acquisition loan (20-year note)	$800

Charitable donations:

• Cash paid directly to family in need          $500
  • Cash to TTU for scholarships                        $7,500
  • Cash to political campaign                            $500
  • Household items (clothes, furniture), which are ordinary income property, given to American Red Cross – FMV = $300; Original Cost = $1,200
  • Painting (capital gain property) given to museum; Museum hung painting. FMV = $5,000; Original cost = $1,000
  • Steven serves lunch every Thursday at a soup kitchen. Total mileage driven to and from soup kitchen was 357 miles. (SMR = $0.14 per mile) Steven’s estimated his time to be valued at $75 per hour. Total hours for the year were 52 hours.
  • The couple bid (silent auction) on a fishing trip package at the American Cancer Society gala. The couple paid $10,000 for the trip which had a fair market value of $8,800.

Other unreimbursed expenses:

• Gambling losses – $5,000

r.)           Additional expenses:

• Daycare cost for Charlie – $8,250
• Funeral expenses for Lucy’s father – $6,200

s.)           Additional expenses related to the house:

• Utilities – $7,200
• Insurance – $4,500

• General repairs & maintenance – $2,300

t.)           Lucy is attending Texas Tech University to earn her master’s degree in accounting.  She is in her fifth year of higher education. Her tuition and required course expenses totaled

$8,000. Additionally she spend $575 on books. She received a scholarship from the School of Accounting for $1,500. She did not have to perform any services in order to receive the scholarship.

Scarlet & Black Bookkeeping

Income Statement

For the Year Ended December 31, 2019

$       1,200.00 $           275.00

Revenue                                                                                                                $ 120,000.00

Expenses Professional insurance Training seminar Travel to clients Lodging Meals Airfare New computer New office chair Wages paid to employee Payroll taxes Owner distribution Professional expense (attorney fee) Office supplies Late filing penalty Charitable contributions Contribution to political candidate Total Expenses

$       3,125.00 $       1,250.00 $       1,800.00 $       1,400.00 $           850.00 $ 38,000.00 $       2,907.00 $ 60,000.00 $       1,300.00 $           775.00 $           225.00 $           800.00   $           350.00 $ 114,257.00

Net Income                                                                                                           $       5,743.00

Additional information:

Drove 1,200 miles to go to clients’ offices

Works from home

Home office = 300 square feet; House = 3,000 square feet

Check Price Discount

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