federal income tax
JANE AND JAMES BART
James Bart ( age 52 social security number 128-52-8538) and Jane Bart (age 50 SS# 815-45-6258) presently live at 80 First Street, Merrick NY 11565. James is a District Manager for the Olive Garden restaurant chain. . Jane owns and manages The Copy Shop. James’s W-2 is attached. You have been engaged to prepare their 2017 federal income tax return. Everyone has health insurance
The Bart’s have four (4) children. Jeannie (age 20 SS#512-36-3690) is an assistant manager of a clothing store located in Rockville Centre NY. Her annual salary is $19,000 per year. She lives at home and put her entire paycheck into a savings account.
Jason (age 23 SS number 428-36-3324) is a full time student at Columbia. His parents pay tuition, all of his expenses and provide him with a car. In 2017 he did not work. Instead he went to school full time. For 2017 John had $700 of interest income. John is finishing up his 4th year of college. His parents paid $30000 in tuition. You will need to determine the best way to handle the tuition. Columbia ID is 51-4872876
Jackson (age 16 SS# 122-22-9988) works at ABC coffee and makes $6000 for the year. He lives at home.
Paul (age 9 SS # 105-55-4222) goes to ABC Daycare at 605 3rd Ave in Babylon NY 11565. ID number of daycare is 11-5575566. The Bart’s pay $3500 per year for daycare.
Finally the Bart’s provide over half of the support for James’s mom Anne Pierce. (age 78 SS# 568-72-6051). Anne does not live with James and Jane . Anne’s only source of income is $8900 of Social Security. James’s dad died in 2012.
3. Jane owns a copying store, The copy shop ( Employer ID 11-2843565, business code 453210) at 875 Hard Street, Merrick NY 11730. She uses the cash basis of accounting except for the cost of good sold. Her 2017 receipts and disbursements per the business checkbook are as follows: (remember not everything paid out of the checkbook is deductible nor does it always belong on Schedule C. it might belong to another schedule) On the next page you will find the information from the checkbook.
A. Cash receipts from copying and printing services $245,000
B. Cash Receipts form office supplies sold 69,000
C. Lease Payments on Business Location 33,500
D. Speeding ticket while delivering copy to client 150
E. Utilities 5650
F. State Income Tax Bart’s 2016 tax return paid 5/15/17 4000
G. Advertising 3500
H Maintenance 2000
I Paper cost for coping (not in cost of good sold) 59,000
J Employee Wages 55,000
K. Employee Payroll Taxes 7,000
L. Health Insurance Premiums for Employees 5,000
M Health Insurance Premiums for Jane 6,000
N. Office Supplies 8,000
O. Purchases of office supplies for resale to customers 36,000
P. Interest expense on Business Loan 4,500
Q. Entertainment Expenses 500
R. Insurance Liability 2,400
S. Charitable Contribution to Columbia 3,000
T. Repairs on Equipment (coping and printing machines) 2,200
U Miscellaneous Expense 500
Office supplies for resale: Beginning Inventory $15,000.00. Ending Inventory $9,000.
Prior to 2017 JANE’s business purchased the equipment listed below. No section 179 deductions were taken on this equipment.
4 Copy Machines ($7000 each)
Two (2) Computers were purchased at $3,000 each on March 7, 2017 Computer’s are a 5 year recovery life. A new copying/printing system was purchased at $24,150 on June 6, 2017. A section 179 deduction was taken for $19,000 and the remainder should be depreciated using a 7 year life. Jane knows she can take more as a section 179 deduction but thinks her business will grow and wants to keep some depreciation expense into future years.
No bonus depreciation is elected.
4. In November, James won $1,500 cash as a contestant on the TV Jeopardy.
5. On August 10, 2017 Jane sold 150 shares of common stock she owned in AES corporation for $2,950. Jane bought the shares from her sister, Kate, on April 12,2011 for $2475. Kate purchased the stock in 2001 for $3200.
6. Other capital transactions are as follows:
100 Seal CO
200 Light Corp
500 Luck Co
7. The Bart’s gave various used clothing to Goodwill Industries on 4/5/16 (original cost $1700 FMV $1150). The Bart’s have receipts and the value per Goodwill which is located in 500 Bedford Park Blvd Bronx NY 10468. They purchased the goods donated at various times.
8. James spent $100 hours in volunteer services for the Red Cross. He estimates the value of his services to be worth $3175.
9. Dividends received from GE Corp $1100. These dividends are “qualified”
Stock Dividend received from IBM with a value of $200. Only stock was offered.
10. Interest earned on savings account Citibank $550
Interest earned on Merrick school district bond $2500
Interest earned on Treasury note $4000
11. James drove his personal car (2015 Ford Taurus) 18,000 during 2017. The 18,000 miles included 3,000 for commuting miles (10 miles per day) and 7,000 miles of unreimbursed travel. James also drove 800 miles as a volunteer for the Red Cross. He also drove 900 miles to various doctors (75 per month). He purchased his car on 7/1/2015 and always uses the automatic mileage method. He keeps a log of all his business travel. His other expenses were:
Meals and entertainment $550.00
James eats at Olive Garden each night he works. He still eats there even though he is really sick of it. The value of those meals for the year are $3000.
12. The following were paid out of the Bart’s personal check book. Remember some of these might belong on Schedule C, on A or not at all.
Dentist bill for Jason . $450
Automobile Insurance on personal car 3700
Subscription to “Printing Professional” magazine 80
Political Contribution to Governor’s Campaign 400
Personal Interest on Visa Credit card 660
Real Estate Tax on PriJane Residence 4500
Mortgage Interest on PriJane Residence 8000
Principal of Mortgage 3000
Hospital and doctor bills ( Medical Insurance 6000
reimbursed them $3500)
Tax Return fee paid to Susan Honig, Cpa (of the 1095
Total fee $750 applies to Jane’s business)
Safe Deposit box for stock certificates 35
Life insurance premiums for James and Jane 7800
Dues to Gold Gym for aerobic classes 450
Cash Contribution to Unitarian Church 5000
Unreimbursed Medical prescriptions 245
Others Various Charities 1000
Vet Bill for Fuzz dog 150
13. James and Jane’s dog chewed up their wonderful grandfather clock valued at $4000. Insurance only covered $2000. James also discovered that his laptop computer was stolen out of his car on 5/1/17. The value of the computer was $1500 and it was not insured. Computer cost $ 3000 on 4/15/16 (very fancy computer to be so pricy).
14. James and Jane purchased a rental house on 6/30/17. They paid $250,000 and estimated that land was 20% of the purchase price. The house is located at 218 Oak Lane Berkshire MA 05625.They actively participated in the management of the house. The following are the income and expenses related to the house (House was rented all year round. The Bart’s did not use it at all)
Rental Income 11500
Mortgage Interest 6000
Real Estate Tax 1700
Homeowners Insurance 500
The house depreciation uses MARCS tables for residential real estate mid month convention. Use a separate 4562 form than the Printer Copy.
15. The Bart’s made four estimated tax payment to the IRS for 2017 of $1200 each for a total of $4800. They also made four estimated tax payments to NYS for $300 each. The last State payment was made on 1/15/18
16. During 2017, JANE incurred $3155 in expenses investigating whether to open another printing business in Scarsdale NY. She decided not to open up the additional store.
Prepare the Bart’s Federal income tax return for 2017 with all supporting schedules regardless of whether they will be able to utilize the deduction. For example, I still want the casualty form, Medical expenses regardless of whether they meet the AGI threshold. 1/3 of the grade of this project will be based on your reasons for including, calculating or excluding items. An explanation of the tax treatment for all points is required. Each student is required to hand in a project with their own set of explanations. Group explanations are not acceptable.
Round all answers to the nearest dollar. DO NOT SHOW CENTS.
SCHEDULE A, B, C, D, E, SE,
2106 (EMPLOYEE BUSINESS EXPENSE)
2441 (DEPENDENT CARE CREDIT)
4562 (2 COPIES DEPRECIATION)
8949 (SALES AND OTHER DISPOSITIONS)
8283 (NON CASH CHARITABLE DEDUCTION)
8582 (PASSAVE ACTIVITY LOSS LIMITATIONS
8863 (EDUCATIONAL CREDITS)
OTHER WORKSHEETS AS REQUIRED
YOU WILL NEED THE CAPITAL GAIN WORKSHEET
CHILD CREDIT WORK SHEET
SELF EMPLOYED HEALTH WORKSHET
THERE MAY BE MORE.
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