Problem 1 - Dr. Ivan I. Incisor and his wife Irene arc married and file a joint velum for 2015. Ivan's Social Security number is 477-34-4321 and he is 48 years old. Irene I. incisor's Social Security number is 637-31-4927 and she is 45 years old. They live at 468 Mule Deer Lane, Spokane, WA 99206.
Dr. Incisor is a dentist and he took 6 months off work to attend a cosmetic dentistry training program in 2015. His 2015 Form W-2 from his job at Bitewing Dental Clinic, Inc., showed the following:
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Wages
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$65,000
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Withholding (federal income tax)
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6,000
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The Incisors rove a 17-year-old song liar who is enrolled in the eleventh grade at the Perpetual Perpetuity School. Ira's Social Security number is 690-99-9999. The Incisors also have an 18-year-old daughter, Iris, who is a part-time freshman student at Snow Mass Community College (SMCC). Iris' Social Security number is 899-99-9999. Iris is married to Sean Slacker (Social Security number 896-33-0954), who is 19 years old and a part-time student at SMCC. Sean and Iris have a 1-year-o1d child, Seth Slacker (Social Security number 648-99-4306). Sean, Iris, and Seth all live in an apartment up the street from Ivan and Irene during the entire current calendar year. Sean and Iris both work for Sean's wealthy grandfather as apprentices his business. Their wages for the year were a combined $50,000, which allowed them to pay all the personal expenses for themselves and their son.
Ivan and Irene have saving account interest income of S380 from the Pacific Northwest Bank.
Required: Use a computer software package to complete Form 1040 for Ivan and Irene Incisor for 2015. Be sure to save your data input files since this case in be expanded with more tax information in later chapters. Make assumptions regarding any information not given.
Problem 2- The following additional information is available for the Dr. Ivan and Irene Incisor family.
Ivan and Irene have the following investment income, in addition to that reported in Chapter 1:
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Dividends (qualified) on Big Bank stock
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$900
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Dividends (qualified) on Big Gas Company stock
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490
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Dividends (nonqualified) from Mango Mutual Fund
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145
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Interest on Washington State Municipal Bonds
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700
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Interest on Big Electric Company Bonds
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675
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Ivan went to a local casino and won $5,900 playing Keno. Ivan had no other gambling income or loss for the year.
In February, Irene received $50,000 in life insurance proceeds from the death of her friend Sharon.
In July, Ivan's uncle Igor died and left him real estate (undeveloped land) worth $72,000.
Five years ago, Ivan and Irene were divorced. Ivan married Mary Molar, but that marriage did not work out and they were divorced a year later. Under their divorce decree, Ivan pays Mary $12,600 per year alimony. All payments were made on time during 2015. Mary's Social Security number is 667-34-9224. Three years ago, Ivan and Irene were remarried.
Bitewing Dental Clinic, Inc. pays Ivan's dental license fees and membership dues to dental organizations. During 2015, Bitewing paid $1,240 for such dues and fees for Ivan.
Irene was laid off from her job on January 2, 2015. For 2015, she received $3,850 in unemployment benefits.
Ivan and his family are covered by an employer-sponsored health insurance plan at work. Bitewing pays $700 per month premiums for Ivan and his family. During the year, Irene was in the hospital for a few days to have her appendix removed. The bill for the surgery was $5,100 of which the health insurance plan reimbursed Ivan the full $5,100.
Required: Combine this new information about the Incisor family with the information from Chapter 1 and complete a revised 2015 tax return for Ivan and Irene, Be sure to save your data input files since this case will be expanded with more tax information in later chapters.
Problem 3- The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1 and 2.
On September 1, Irene opened a retail store that specializes in sports car accessories. The name of the store is "Plus Two Cones." The store is located at 617 Main Street, Spokane, WA 99206. The store uses the cash method of accounting. Her income and expenses for the year are as follows:
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Sales of merchandise
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$63,400
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Inventory, Septmber 1 (purchased in August)
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40,100
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Inventory, December 31
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38,100
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Purchases during the year
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37,800
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Sales returns and allowances
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600
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Store rental
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7,550
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Office expense
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1,380
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Insurance
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800
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Advertising
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3,100
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Employee wages
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3,350
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Payroll and other business taxes
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505
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Interest on bank loan to open store
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2,760
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Accounting fees
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310
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Utilities
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992
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Telephone
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800
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Maintenance
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427
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Miscellaneous
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65
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Chris has been a widower for 10 years with a dependent son, Arnold (Social Security number 276-23-3954), and he files his tax return as head of household. Arnold is an 18-year-old high school student; he does not qualify for the child credit. They live next door to the health club at 4323 New Cut Road. Chris does all the administrative work for the health club out of an Office in his home. The room is 153 square feet and the house has a total of 1,800 square feet. Chris pays $20,000 per year in rent and $4,000 in utilities.
Chris' Social Security number is 565-12-6789. He made an estimated tax payment to the IRS of $1,000 on April 15, 2015.
Required; Complete Chris' federal tax return for 2015. Use Form 1040, Schedule B, Schedule C, and Farm 8829, on Pages 3-49 to 3-59, and any other appropriate schedule(s) to complete this tax return. Do not complete Form 4562 (depreciation). Make realistic assumptions about any missing data.
Problem 4- The following additional information is avaiia.bie for the Dr Ivan and Irene Incisor family. The Incisors own a rental beach house in Hawaii. The beach house was rented for the full year during 2015 and was not used by the incisors during the year. The incisors were active participants in the management of the rental. Pertinent information about the rental house is as follows:
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Address: 1237 Pineapple St., Lihue, HI 96766
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Net rental income
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$20,650
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Mortgage interest
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7,900
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Real estate taxes
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2,300
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Utilities
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2,125
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Maintenance
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2,900
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The house is fully depreciated so there is no depreciation expense.
For the 2015 tax year, on March 15, 2016, Ivan contributes $5,500 to a traditional IRA for himself and $5,500 to a traditional IRA for his wife. He is not covered by a qualified retirement plan at work.
Irene had a retirement plan at the job from which she was laid off on January 2, 2015. The plan had a balance of $24,000. On May 10, 2015, Irene had the entire retirement plan balance rolled directly into an IRA at Timador & Embaucar Brokerage., Inc.
Required: Combing this new information about the Incisor family with the information from Chapters 1-3 and complete a revised 2015 tax return for Ivan and Irene. Be sure to save your data input files since this Case will be expanded with more tax information in later chapters. Note that the "Saver's Credit" discussed in LO 4.8, may apply.
Problem 5- The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-4.
Ivan and Irene paid the following in 2015 (all by check or can otherwise be substantiated):
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Contributions to Perpetual Perpetuity Catholic Church
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$410
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Tuition to Perpetual Perpetuity Catholic School for Ira
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6,000
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Clothes to Salvation Army (10 bags in good condition)
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275
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Contributions to George Kerry's Congressional campaign
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250
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Psychotherapy for Irene
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2,000
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Eyeglasses for Ira
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375
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Prescription medication and drugs
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1,850
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Credit card interest
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1,345
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Interest on Ivan's dental school loans
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3,125
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Investment interest on stock margin account
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345
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Auto loan interest (auto was paid for by a home equity loan on residence)
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900
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Auto insurance
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1,600
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Dave Deduction, CPA, for preparation for last year's tax return
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700
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Safe-de lit box for storage of stocks and tax data
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100
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Contribution to an educational savings account for Ira
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1,000
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Home mortgage interest
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10,910
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Home property taxes (assume the sales tax deduction is not extended into 2015)
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8,400
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Unreimbursed business expense (seminar on tooth polishing)
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700
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In June, Ivan purchased a new professional digital SLR camera for $6,980. While the Incisors were on vacation in August someone broke into their residence and stole the camera. Ivan's homeowner's insurance did not reimburse him for any part of the loss since he declined the special premium add-on for high value items required by his policy.
Required: Combine this new information about the Incisor family with the information from Chapters 1-4 and complete a revised 2015 tax return for Ivan and Irene. Be sure to save your data input files since this case will be expanded with more tax information in later chapters.
Problem 6- The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5.
Ivan's grandfather died and left a portfolio of municipal bonds. In 2015, they pay Ivan $80,000 in tax-free interest. Since the bonds are private activity bonds, the $80,000 is a tax preference for purposes of the AMT. Assume for Chapters 6, 7, and 8 that Ivan's federal income tax withholding from his wages is $12,000, not $6,000.
Required: Combine this new information about the Incisor family with the information from Chapters 1-5 and complete a revised 2015 tax return for Ivan and Irene. Be sure to save your data input files since this case will be expanded with more fax information in later chapters.
Please note: This problem requires the calculation of AMT. The home equity interest of $900 on the purchase of an automobile is not deductible for AMT (see line 4 of Form 6251). Please also note that Page 2 of Form 6251 must be filled in to calculate the lower AMT amount on qualified dividends and that the Saver's Credit still applies.
Problem 7- Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Heather Drive, Henderson, NV 89002. Her employer identification number is 95-1234321 and her Social Security number is 123-45-6789. Sherry keeps her books on an accrual basis..The income and expenses for the year are:
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Gross sales
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$351,200
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Returns and allowances
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(4,500)
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Net sales
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$346,700
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Expenses:
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Beginning inventory (at cost)
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$84,300
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Add: purchases
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100,700
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Cost of goods available for sale
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185,000
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Less: ending inventory (at cost)
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65,000
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Cost of goods sold
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$120,000
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Rent
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28,800
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Insurance
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1,500
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Legal and accounting fees
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2,800
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Payroll
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42,100
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Payroll taxes
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3,440
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Utilities
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1,850
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Office supplies
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750
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Advertising
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2,100
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In June 1 of this year, Sherry purchased the following new assets for the store:
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Depreciable Basis
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Recovery Period
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Heavy-duty truck
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$31,000
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5 year
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Desk and file cabinets
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17,000
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7 year
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Computer
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3,000
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5 year
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The truck is not considered a passenger automobile for purposes of the luxury automobile limitations.
Required: Assuming that all other assets are fully depredated and Sherry elects out of bonus depreciation and does not make the election to expense, complete her 2015 Schedule C and Form 1562 on Pages 7-41 to 7-44. Make realistic assumptions about any missing data.
Problem 8- The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-7.
Ivan said the following securities during the year and received a Form 1099-B that showed the following information:
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Security
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Description
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Date Acquired
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Date Sold
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Selling Price
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Adjusted Basis
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Orange, Inc.
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100 Shares Common
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02/11/97
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01/16/15
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$3,080
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$2,150
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Banana, Inc.
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100 Shares Common
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07/17/01
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07/31/15
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2,000
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4,210
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Grape Corp.
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100 Shares Preferred
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12/08/14
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09/25/15
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8,975
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10,510
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Plum, Inc
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5 Bounds due 4/2015
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12/30/05
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01/02/15
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5,155
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5,320
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Peach Mutual Fund
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5,010.150 Shares
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05/30/06
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10/22/15
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60,120
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56,480
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The selling price given is net of sales commissions, In addition to the above amounts; the Mango mutual fund distributed a long-term capital gain of $450 on December 30, 2015.
Ivan purchased 5 acres of raw land in Reno, NV, 10 years ago. His basis in the land was $90,000. On August 1, 2015, he sold the land for $150,000 on the installment method. Ivan received $52,500 in the year of sale, and the balance was payable at $9,750 per year for the next 10 years, plus a market rate of interest.
On May 15, 2015, Ivan and Irene sold their personal residence for $585,150 and purchased a new house for $725,000. They bud owned the old house for 20 years and it had an adjusted basis of $35,075. The hour had been their personal residence for all the years they were married. They moved into the new house on May 18, 2015.
Required: Combine this new information about the Incisor family with the information from Chapters 1-7 and complete a revised 2015 tax return for Ivan and Irene. No AMT is payable. This completes the Group 5 multi-chapter case.
This is the textbook for this course:
50212 440 S2 2016
Cengage: Income Tax Fundamentals, by Whittenburg, 2015 Edition. ISBN 9781285439525. The text is available in a number of formats, including an etext. Any of the formats are permitted for this course. You may purchase access to McGraw Hill's Connect. However, you are not required to have this access.
Attachment:- Incisor 3.rar