PLEASE HELP I NEED AN ANSWER TO THIS QUESTION ASAP:
Use the following information to prepare the Vances’ 2012 federal income tax return (Form 1040) including all of the supplementary schedules. Schedule A, Schedule B, Schedule C, Schedule D, Schedule E, Schedule SE, Form 2106 EZ, Form 2441, Form 4562 (for the dental practice), Form 4562 (for the rental property), Form 4684, Form 4797, Form 8863 and Form 8949 are required. Ignore any consideration of the AMT (the taxpayers are not in AMT), and make reasonable assumptions for general information that is not provided, if any. You may download the forms from the IRS website for which there is a link on Blackboard. You may access the instructions to the forms at the IRS site as well. When completing the forms please round each line item to the nearest dollar.
In order to get a solid understanding of how the various tax forms are related, you are to do this assignment manually. You may not use any tax return preparation software. Please attach all supporting calculations that you make in completing the forms. At a minimum you must attach supporting calculations for the self employment tax and the deductible portion of self employment tax, the income tax (line 44 of Form 1040), any education credits taken, the child tax credit (if applicable), depreciation, and the gain or loss on assets sold (including the calculation for accumulated depreciation used to determine adjusted basis).
1. Paul and Judy Vance are married and file a joint return. Paul is self employed as a dentist, and Judy is a college professor. Paul and Judy have five children. The oldest is Vince who lives at home. Vince is a law student at the University of Cincinnati and worked part time during the year, earning $1,500, which he spent for his own support. Paul and Judy provided $6,000 toward Vince’s support (including $4,000 for Vince’s tuition). They also provided over half the support (including $2,900 for tuition) of their daughter, Joan, who is a full time student at Edgecliff College in Cincinnati. Joan worked part time as a waitress during the year, earning $3,200. Joan lived at home until she was married on December 15, 2012. She filed a joint return with her husband, Patrick, who earned $28,000 during the year. The Vances’ youngest children are triplets, Jennifer, Alison and Erin. They lived in the Vances’ home for the entire year. The Vance’s provide you with the following additional information:
A?· Paul and Judy would like to take advantage on their return of any educational expenses paid for their children.
A?· The Vances do not want to contribute to the presidential election campaign.
A?· The Vances live at 621 Franklin Avenue, Cincinnati, OH 45211 and their telephone number is (513)262 1141.
A?· Paul’s birthday is March 5, 1958 and his Social Security number is 333 45 6666.
A?· Judy’s birthday is April 24, 1961 and her Social Security number is 566 77 8888.
A?· Vince’s birthday is November 6, 1989 and his Social Security number is 576 18 7928.
A?· Joan’s birthday is February 1, 1993 and her Social Security number is 575 92 4321.
A?· Jennifer, Alison and Erin’s birthday is December 12, 2007 and their Social Security numbers are 613 97 8465, 613 97 8466 and 613 97 8467, respectively.
A?· The Vances do not have any foreign bank accounts or trusts.
A?· If the Vances have an overpayment, they would like the overpayment applied to their 2013 estimated tax.
2. Judy is a lecturer in the education department at Xavier University in Cincinnati, where she earned $62,000. The university withheld federal income tax of $7,150, state income tax of $1,900, Cincinnati city income tax of $700, $2,604 of Social Security tax, and $899 of Medicare tax.
3. The Vances received $800 of interest from State Savings Bank on a joint account. They received interest of $1,000 on City of Cincinnati bonds they bought in January with the proceeds of a loan from Third National Bank of Cincinnati. They paid interest of $1,100 on the loan. Paul received a dividend of $540 on General Bicycle Corporation stock he owns. Judy received a dividend of $390 on Acme Clothing Corporation stock she owns. Paul and Judy received a dividend of $865 on jointly owned stock in Maple Company. All of the dividends received in 2012 are qualified dividends.
4. Paul practices under the name Af?cAc‚¬A??oPaul J Vance, DDS.Af?cAc‚¬ His business is located at 645 West Avenue, Cincinnati, OH 45211, and his employer identification number is 01 2229867. Paul’s gross receipts during the year were $121,200. Paul uses the cash method of accounting for his business and did not make any payments in 2012 that require him to file Form 1099. Paul’s business expenses are as follows:
|
Advertising |
$1,200 |
|
Professional dues |
490 |
|
Professional journals |
360 |
|
Contributions to employee benefit plans |
2,000 |
|
Malpractice insurance |
3,200 |
|
Insurance on office contents |
720 |
|
Fine for overbilling State of Ohio for work performed on welfare patient |
5,000 |
|
Interest on money borrowed to refurbish office |
600 |
|
Accounting services |
2,100 |
|
Miscellaneous office expense |
388 |
|
Office rent |
12,000 |
|
Dental supplies |
7,672 |
|
Utilities and telephone |
3,360 |
|
Wages |
30,000 |
|
Payroll taxes |
2,400 |
|
Depreciation |
? |
In July, Paul decided to renovate his office. This project was completed and the assets placed in service on August 12th. Paul’s expenditures included $8,000 for new office furniture, $6,000 for new dental equipment (7 year recovery period), and $2,000 for a new computer. Paul elected to compute his recovery allowance using MACRS. He did not elect to use Section 179 immediate expensing, and he chose to not claim any bonus depreciation. On September 8, 2012 he sold his old dental equipment for $1,900. He purchased the old equipment on March 14, 2007 for $4,800. Paul had been depreciating the old equipment using MACRS deprecation with a half year convention. No Section 179 immediate expensing or bonus depreciation was taken. The old furniture and computer were fully depreciated before 2012. They are being stored in the basement of his office for the time being.
5. Judy’s mother, Sarah, died on July 2, 2007, leaving Judy her entire estate. Included in the estate was Sarah’s residence (325 Oak Street, Cincinnati, OH 45211). Sarah’s basis in the residence was $30,000. The fair market value of the residence on July 2, 2007, was $155,000. The property was distributed to Judy on January 4, 2008. The Vances have held the property as rental property and have managed it themselves. From 2008 until June 30, 2012, they rented the house to the same tenant. The tenant’s employer transferred him to California and he moved out in June. Since they did not want to bother finding a new tenant, Paul and Judy sold the house on June 30, 2012. They received $140,000 for the house and land ($15,000 for the land and $125,000 for the house), less 6 percent commission charged by the broker. They had depreciated the house using the MACRS rules and conventions applicable to residential real estate. To compute depreciation on the house, the Vances had allocated $15,000 of the property’s basis to the land on which the house is located. The Vances collected rent of $1,000 a month for the six months the house was occupied during the year. They incurred the following related expenses during this period:
|
Property insurance |
$500 |
|
Property taxes |
800 |
|
Repairs and maintenance |
465 |
|
Depreciation (to be computed) |
? |
6. The Vances sold 200 shares of Capp Corporation stock on September 3, 2012, for $42 a share (minus a $50 commission). They received a Form 1099 B for the sale. The Vances received the stock from Paul’s father on June 25, 1980, as a wedding present. Paul’s father originally purchased the stock for $10 per share in 1967. The stock was valued at $14.50 per share on the date of the gift. No gift tax was paid on the gift.
7. Paul made a single bet at Off Track Betting for the Kentucky Derby and won $750. $75 of federal income tax was withheld.
8. Judy is required by Xavier University to visit several high schools in the Cincinnati area to evaluate Xavier University students who are doing their practice teaching. However, she is not reimbursed for the expenses she incurs in doing this. During 2012 she drove her personal automobile 6,800 miles in fulfilling this obligation. Judy drove an additional 6,700 personal miles during 2012. Judy uses the standard mileage method to calculate her car expenses. She has maintained records to support her business mileage deduction.
9. On April 1, 2012, the Vances’ house was robbed. They apparently interrupted the burglar because all that was missing was an antique diamond ring Judy inherited from her grandmother on June 12, 2004 and $3,000 in cash. Unfortunately the Vances did not have a separate rider on their insurance policy covering the jewelry. Therefore, the insurance company reimbursed them only $500 for the ring. Judy’s basis in the ring was $11,000, and its fair market value was $15,500. Their insurance policy also limits the amount of cash that can be claimed in a theft to $200.
10. Paul and Judy have given you a file containing the following receipts for expenditures during the year:
|
Prescription medicine and drugs (net of insurance reimbursement) |
$ 376 |
|
Doctor and hospital bills (net of insurance reimbursement) |
2,468 |
|
Penalty for underpayment of last year’s state income tax |
15 |
|
Real estate taxes on personal residence |
4,762 |
|
Interest on home mortgage (reported on Form 1098) |
7,800 |
|
Interest home equity loan (reported on Form 1098 Af?cAc‚¬” proceeds used to pay for a Caribbean cruise) |
450 |
|
Interest on credit cards (consumer purchases) |
595 |
|
Cash contributions to St. Matthew’s church (they received a statement from the church acknowledging their contributions) |
3,080 |
|
Payroll deductions for Judy’s contributions to the United Way |
150 |
|
Professional dues (Judy) |
325 |
|
Professional subscriptions (Judy) |
245 |
|
Fee for preparation of 2011 tax return paid April 14, 2012 |
500 |
|
Losses incurred playing blackjack on the Caribbean cruise |
1,450 |
11. The Vances paid $6,400 to send the triplets to the Candy Apple Day Care Center. The day care is located at 12 Roxbury Lane, Cincinnati, OH 45211. Its employer identification number is 19 298763.
12. The Vances filed their 2011 federal, state, and local returns on April 14, 2012. They paid the following additional 2011 taxes due with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75.
13. The Vances made timely estimated federal income tax payments of $1,500 each quarter during 2012. They also made estimated state income tax payments of $300 each quarter and estimated city income tax payments of $160 each quarter. The Vances made all fourth quarter payments on December 31, 2012. They would like to receive a refund for any overpayments.