Individual Tax Project -
Instructions:
Complete the 2016 federal income tax return for Robert and Marie Brown. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps. You may omit AMT considerations for the return. You may work individually or in teams of two for this project.
Robert and Marie Brown live in Roswell, Georgia. Robert is the Vice-President of Sales at a small start-up company. Marie is a former advertising executive who currently consults with former clients.
The Browns have three children Rebecca (age 18), Alan (age 15), and David (age 12).In January, Rebecca left home to attend a liberal arts college. All three children qualify as Robert and Marie's federal income tax dependents. The Browns plan to file a joint tax return. The Browns provided the following information:
- Robert's social security number is 598-94-2583
- Marie's social security number is 301-52-2942
- Rebecca's social security number is 887-44-8710
- Alan's social security number is 810-42-9092
- David's social security number is 855-11-3021
- The Brown's mailing address is 85 North Maple Drive, Roswell, Georgia 08233
Robert Brown reported the following the following information relating to his employment during the year:
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Employer
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Gross Wages
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Federal Income Tax Withholding
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State Income Tax Withholding
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Georgia Energy
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$118,325
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$29,230
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$14,400
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The above amounts do not reflect any income items described below. Robert's employer withheld all payroll taxes it was required to withhold. The entire Brown family was covered by minimum essential health insurance during each month in 2016. The insurance was provided by Robert's employer, Georgia Energy.
Marie Brown received the following revenue during the year (she uses the cash method of accounting).
Consulting revenue reported to her on a Form 1099-MISC, Box 7
High-end Retail $32,000
Jensen's Health Products $8,500
Strategic Solutions $3,750
During the year, Marie paid the following business expenses:
Consultant-related:
Airfare $2,900
Hotel $1,450
Meals $390
Parking $320
Marie drove 2,900business miles for her consulting-related activities (she has documentation to verify)
None of Marie's business activities s required the filing of Form(s) 1099 to report payments she made during the tax year. In addition, Ms. Brown drove a 2014 Lexus purchased on January 1, 2014 for all of her business mileage. She drove the vehicle a total of 10,605 miles during the year for all purposes. Marie has written documentation to support the mileage amounts. She also has access to another vehicle for personal purposes.
The Browns also received the following interest and dividends during the year:
Interest income from First Bank of Georgia $320
Interest income from Patterson, Georgia School District $200
Interest income from U.S. Treasury Bond $350
Interest income from General Mills corporate bond $400
Qualified dividend income from Rio Tinto $1,500
Qualified dividend income from Microsoft $750
Qualified dividend income from Cooper Tire $200
Qualified dividend income from Cardinal Health $425
Qualified dividend income from Union Pacific $140
Qualified dividend income from Procter & Gamble $190
Qualified dividend income from PepsiCo $225
Qualified dividend income from Kellogg $200
Qualified dividend income from Abbott Labs $275
Qualified dividend income from 3M $350
Dividend income (not qualified) from China Fund $2,000
The Browns did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.
The Browns had the following activity in their brokerage account during the year(all transactions were reported on a Form 1099-B. Basis information on each stock sale was reported to the IRS):
Sold 2,000 shares of Microsoft 7/1/16 $22,500
Sold 75 shares of Apple, Inc. 4/15/16 $28,750
Sold 350 shares of Cooper Tire 10/14/16 $14,700
Sold 1,000 shares of Cardinal Health 9/3/16 $35,000
Sold 50 shares of Union Pacific 1/7/16 $2,750
Purchased 100 shares of Procter&Gamble 7/10/16 $7,700
Purchased 350 shares of Cooper Tire 11/1/16 $14,000
Purchased 350 shares of PepsiCo 5/14/16 $32,000
Purchased 300 shares of Kellogg 10/14/16 $21,000
Relevant tax basis/holding period information related to sales of securities in the current year:
Purchased 2,000 shares of Microsoft on 5/1/16 for $21,000
Purchased 200 shares of Apple, Inc. on 3/8/2014 for $90,000
Purchased 300 shares of Cooper Tire on 1/12/2013 for $9,000
Purchased 50 shares of Cooper Tire on 6/28/16 for $2,000
Received 1,000 shares of Cardinal Health from Marie's father as a gift on 10/10/98. Her father's basis in the stock at the time of the gift was $7,000. Fair market value of the stock at the date of the gift was $41,000
Purchased 100 shares of Union Pacific on 9/5/15 for $6,000
The Browns have a $43,000 long-term capital loss carryoverfrom their prior tax year.
The Browns received a Georgia state income tax refund of $400 in May of 2016. The Browns received the refund because they had overpaid their Georgia state individual income tax in 2015.On their 2013 Federal income tax return, the Browns deducted and received tax benefit for allthestate tax income taxes they paid in 2015.
In May, Robert was injured in a home accident. The injury prevented Robert from working for about a month. During this time, Robert received $15,000 in disability payments attributable to a disability insurance policy. The disability policy premiums were paid on Robert's behalf as a nontaxable fringe benefit.
The Browns paid the following expenses during the year:
Dentist (unreimbursed by insurance) $1,500
Doctors (unreimbursed by insurance) $2,425
Prescriptions (unreimbursed by insurance) $675
Real property taxes on residence $7,525
Vehicle property tax based upon value $1,250
Mortgage interest on principal residence $12,550
Margin interest paid to broker $600
Contribution to United Way $2,000
Contribution to American Cancer Society $5,000
Contribution to neighborhood drive to oppose development project $500
Contribution to the Temple Mount Synagogue $12,000
Fee paid to Mouser, Johnson, and Hintze CPAs for tax preparation $450
The Browns also donated clothing, electronics, furniture and other household goods to the Salvation Army of Roswell, Georgia on April 15, 2016. Estimated thrift value of the goods donated was $275.
Miscellaneous Information
Marie received the following payments as a result of a lawsuit she filed for damages sustained in a car accident:
Medical Expenses for physical injuries $2,500
Emotional Distress (from having been physically injured) $12,000
Punitive Damages $10,000
Total $24,500
Eight years ago, Marie purchased an annuity contract for $88,000. She received her first annuity payment on January 1, 2016. The annuity will pay Melissa $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Melissa on Form 1099-R for the current year (box 7 contained an entry of "7" on the form).
On September 1, the Browns paid $200 in foreign taxes attributable to the dividend received from the China Fund.
During the year, the Browns paid a portion of Rebecca's tuition to attend The College of Liberal Arts of Georgia (CLA). They also purchased Rebecca's school books. Rebecca attended the spring/summer and the fall semesters as a full-time student. In total, the Browns paid $9,000for tuition and $2,000 for books. Rebecca used $6,000 from a scholarship she received from CLA to pay the remaining $6,000 of tuition for the year. Rebecca was not required to perform any services as a condition of accepting the scholarship. Rebecca was not employed during the year. CLA's address and employer identification number (EIN) is as follows:
The College of Liberal Arts of Georgia
65 Ivory Tower
Pine Grove, GA 08069
EIN- 22-5698324
The Browns would like to contribute to the Presidential Election Campaign. The Browns would also like to receive a refund (if any) of tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.