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Tax Return Problem

1040 Individual Tax Return

1040 Schedule A Itemized Deductions

1040 Schedule D Capital Gains & Losses

Form 8949, -Sale or other Disposition of Capital Assets

Form 2106 Employee Business Expense

Form 3903 Moving Expenses

Form 4684 Casualty and Theft

Form 4797 Sale of Business Property

Form 2441 Child care Expenses

Form 8812 Child Tax Credit

Form 8863 Education Credit

Submit these forms and show the calculations on the worksheet, even if the facts do not result in a deduction- Demonstrate your knowledge of the rules regarding the facts.

Do not use schedule E- just enter the correct amount directly on 1040

Assume filing is for calendar year 2017

All numbers are for the full tax year.

Fill in Column A-C

Column A Treatment: The first column contains a set of facts that may have a tax consequence. Analyze and identify the issue(s) that each fact pattern presents. Enter into Column A the tax treatment for that issue. If the information is used in a calculation, state how it is used, (e.g. Long term capital losses are netted against long term capital gains). If the item is included in Gross income, write include in gross income. If an amount is excluded from gross income, write excluded from gross income and why. If the number is deducted FOR or FROM gross income, write Deducted FOR or FROM Gross income whichever is applicable, and list any applicable limitations. If the fact pattern has no effect on taxable income because of an exclusion or limitation, write No Effect and WHY. If calculations are needed, show calculations in Treatment Section . (e.g. bought X shares for $Y/ share = $ basis + adjustments, or adjustment to gross wages for reductions). Otherwise, explain tax treatment/ rule and why. The purpose of this column is for you to show that you have identified the issue and know the proper tax treatment. PLEASE MAKE SURE YOU EXPLAIN WHY AN ITEM IS TREATED IN A SPECIFIC MANNER (e.g. identify the tax rule and limitations do not just put the result or N/A in the Treatment column). Points will be given for this column even if the return is filled out incorrectly. However, maximum points are earned by filling in all columns and forms correctly.

Column B Form & Page: List what Form / Schedule (e.g. 1040, page 1) where this information is reported or used in a calculation for the first time. For example if it is entered on one form and netted into a number that is carried to a second form, only identify the first entry. The purpose of this column is for you to show that you are aware which form a particular item is to be reported. The forms themselves must also be submitted to earn the maximum number of points.

Column C: Line: Identify what line on the form this information is initially reported. Although you are reporting where the number is initially reported, you will need to complete the whole form and carry the numbers forward to the 1040.

Only report rounded dollars, (e.g. no cents).

It is suggested that you read the whole problem to identify income and deductions that might be spread throughout the problem before entering the numbers on the tax forms. Watchadditional information is sometimes contained in later questions that may have an impact on your answers. You may want to create a worksheet to keep track of, and organize, the income and deductions.

Assume that you have all proper documentation needed for amounts included in gross income, all exclusions from gross income or deductions. Also, assume that you have the necessary records to obtain the best result for possible alternative treatments. (e.g. which stocks to sell).

You do NOT need to hand in any Work Papers that are used prior to filing the requested forms.

Ignore the Alternative Minimum Tax issues.

Help can be obtained from visiting the IRS website at:

If you wish to learn more about a specific topic (which form or line it is reported upon or deducted), type the name of the topic (e.g. education) in the window on the upper right, and hit Search.A list of publications will be provided and look at these for help.

The information to get started is as follows:

Client data:

Your name, Steven in problem, Accountant

(born: 6/21/1969) SS# 555-21-3333

Sally W. Brown, Nurse (born: 7/10/1968) SS# 222-67-4444

123 Long Ave., Broomfield, Colorado 80020

Cash basis taxpayer

W-2 Wages Taxable Fed Income tax Withheld

	Facts/ Information	Treatment (A)	Form & page # (B)	Line (C)
1	Sally buys a computer 12/30/ 2012 for $1,000 that is used 40% personal and 60% for business. She claims depreciation of $400. It is sold on 1/2/2017 for $500 (Hint: This is Sec. 1245 property- Part III)
2	Steven has more work in his accounting job than he can accomplish in the 9 hours he spends in the office. Therefore, he works in the kitchen during his time at home. The unreimbursed household expenses allocated to the time he spends in the family room (where the kids watch TV when he is not working) are $680. He would like to take a home office deduction against the $3,000 of his $45,000 annual income that he estimates that he earns at home. How much can he deduct?
3	Steven took a refresher course from the AICPA regarding proposed accounting changes in anticipation of the new rules. The course cost $600 and he was not reimbursed by his employer. (Hint: this was not a course taken at a college or university)
4	Three years ago, Steven attempted to create a loss of $600 on the sale of 100 shares of Crow Corp. stock that he had a total A/B of $2,000 and the A/R was $1,400 (for all 100 shares). On September 6, 2014 (ten days after the sale), he repurchased 100 shares in the same company for $18.00 per share. The IRS disallowed the $600 for the earlier loss. On 10/15/17, Steve sells all of the 100 shares in Crow Corp. stock for a total of $6,400. (He receives a 1099-B form from his broker showing only the second purchase adjusted basis). What is his gain or loss and character from these transactions?
5	Sally had her personal Ford Mustang car stolen on July 4, 2017 that she purchased for $25,000 in 2012. Its fair market value was $18,000 at the time of the theft. The insurance only paid Sally $1,000 and she spent all of it buying a replacement car. What are the tax consequences of these transactions?
6	Sally pays $2,000 in interest on her educational loans from college to Blackbird Bank.
7	Steven pays for all of his widowed mothers (Molly Brown, SS # 976 23-0005) expenses at the retirement community,( Ridge Estates 123 Main Phoenix Az., EIN 99-9999) where she lives, (totaling $12,000) because she is not able to care for herself. Molly has retirement income from her conventional IRA of $2,800 / year, qualified dividends of $500, tax exempt interest of $4,000 and she is a citizen of the US. Can she be claimed as a dependent and are there other tax benefits from these payments? (medical or dependent care) Hint: More than one issue here. Look at the types of potential deductions, (medical & dependent care)
8	Steven and Sally have a 25 year old unmarried nephew, (Robert Biggs SS # 456-12-6789), living with them for 9 months who is attending Metro on a basketball scholarship. Steven & Sally provide all of his room and board at no cost to him, (est. cost of $8,000). Robert earns $3,800 working at the book store that covers his other living expenses. He is a US citizen. Can he be claimed as a dependent?
9	Steven and Sally had the following medical expenses: Prescription drugs $3,000 Doctors visits $4,000 Elective Cosmetic surgery $8,000 Over the counter drugs $1,000 The insurance company paid for $2,000 of these expenses. Steve paid medical Insurance premiums of $4,000 The total miles driven to receive medical treatment was 400 for Steven and Sally. What tax deductions are available in this situation?
10	Robert Biggs, (the nephew), had expenses that Steven paid: Eye glasses $900 Dentist visits $600
11	Taxes paid were: Real Property tax on residence $1,300 Real Property tax on condo (only personal use) $900 Real Property tax on Mountain home (only personal use) $1,000 State income taxes withheld $5,000 Additional payment when they filed 2013 state income tax return on April 15, 2014 $500 Sales taxes (est. from table) $4,000 Personal property tax on car (based on value) $120 Registration fee on car $80 (flat fee for use of roads) Social Security taxs $3,500
12	Mortgage interest paid was: Residence $4,000 Condo (only personal use) $1,000 Mountain home (only personal use) $1,500 Car loan $1,000 Credit card $800
13	Last year when Steven & Sally purchased their Mountain home, they paid $2,000 in points on a 10 year mortgage of $200,000. (not reported to them on Form 1098) What are the tax consequences?
14	The following were donated: Church - cash $3,000 Red Cross -cloths (FMV) $100 Church raffle -cash $50 Value of Time to Boy Scouts (FMV) $500 Mileage to attend church administrative meetings 500 miles Short term Stock to Church with FMV of $160 that was bought for $100
15	Gambling Income of $400 Gambling loss of ($500) Tax preparation $700 Continuing education to meet annual AICPA ethics requirement $330-not a college course nor was the cost reimbursed (Hint: dont forget both income and deduction side of gambling transactions)
16	Sally and Steve spend $9,000 for a nanny to care for their 8 year old child, (John Brown, SS# 345-89-2345) and to clean the house. The nanny spend about 25% of her time cleaning the house & 75% with the kids. Nannys information is: Jane Bush, (893 Robin Way, Boulder Co 80301 and SS # 345-99-4567). The child is a citizen of the US. No employer dependent care was provided. (Disregard any issues about the payment of nannys taxes- Watch: There are 3 different issues in this question)
17	Sally took a college course on drawing blood at University of Colorado (1250 14th St, Denver, Co 80217), for $1,500 (Hint: as a registered nurse, Sally has already completed her 4 year degree No 1098T was received) )
18	Steven attends a business meeting in Phoenix for 3 days. Since his mother lives at a nursing home in the area, he spent the next 4 days visiting her. His expenses on the trip are as follows: Airfare $400 Meals: During the business meeting $300 While visiting his mom $100 Lodging: During business meeting $500 While visiting his mom $800 $200 of the lodging expenses were reimbursed by his employer under an accountable reimbursement plan not reported as wages What is the deduction?
19	During the year, Sally and Steven moved to Colorado from Texas when Steven was transferred by his employer. He expects to remain with the company for the next three years, then change jobs. The costs incurred during the move include: Travel for family $1,300 Transportation of household goods $2,000 Meals during trip $600 Lodging during trip $900 The company has an accountable reimbursement plan, but only reimbursed the Browns for $3,000. It was not treated as wages. What is their deduction?
20	Sally buys a horse when they arrive in Colorado. She enters shows and wins $6,000. The expenses incurred with showing the horse are as follows: Property taxes on the barn: $1500 (Cat #1) Feed: $4,000 Cat #2) Depreciation of the horse trailer: $2,000 (Cat#3) These expenses are in addition to all other facts in the questions above. (Hint: report all deductions on directly onto Schedule A)

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