The instructions to this cumulative problem - the forms


The instructions to this cumulative problem.

The Forms 4562 & 8829 are already completed & can be used to assist in other problems too.

Income Tax Accounting - Fall 2016

Jerry R. (age 52, SSN 367-83-9403) and Janet K. (age 48, SSN 361-73-4098) Apps file a joint return.They reside at 410 E. Vernon Avenue, Carlock, Illinois 61725-1287.Use the following information to prepare the Appses' tax return.Use the approach shown in Examples 10-12 in Chapter 11 to compute the Appses' tax liability (1101.03).They both elect to have $3 to go to the presidential campaign fund and file their return on April 10, 2016.

The Appses' household includes David A. Apps, their 12 year old son (SSN 965-26-4381), and Edwin R. Apps (SSN 157-43-2587), Jerry's 78 year old father.Janet and Jerry provide over half of the support of both David and Edwin.David has no income of his own; Edwin received $4,500 in nontaxable social security benefits during the year.

Jerry works as a carpenter. The information on his Form W-2 is show below.Jerry is an active participant in his employer's 401(k) plan.

Taxable wages

$52,000

Social security and Medicare tax withheld

3,978

Federal income tax withheld

4,970

State income tax withheld     

2,490

Janet owns and operates J&J Networking.The principal business code is 454390.Janet has no employer ID number.She uses the accrual basis in her business and the cost method for valuing the inventory.No changes have been made in the inventory system.Janet operated her business for all 12 months and has an office in her home that she uses exclusively and regularly for business.Janet materially participates in the business. Information relating to her business operation is as follows:

Gross receipts

$60,950

 

 

Returns and allowances

900

 

 

Beginning inventory

2,700

 

 

Purchases

28,625

 

 

Ending inventory

3,825

 

 

 

 

 

 

Expenses:

 

 

 

Advertising

$400

Office expense

$80

Bank service charges

24

Supplies

310

Contribution to SIMPLE plan

10,000

Travel

1,035

Commissions

3,200

Means and entertainment

490

Depreciation on equipmentplaced in service in 2013

1,700

Other business taxes

560

Dues and publications

220

Miscellaneous expenses

35

Insurance (business)

650

Postage expense

110

In addition to the above expenses, Janet uses her personal car in her business.She keeps good records of her business mileage and uses the standard mileage method.The car was first used in the business on May 1, 2012. During 2015 Janet drove 7,631 miles, of which 1,205 were drive for business.The rest were personal miles.

Information related to the Appses' home:

Total area ofhome

1,800 square feet

Area used for business

180 square feet

FMV of home, for purposes of Form 8829, line 36

$240,000

Adjusted basis of home, for purposes of Form 8829, line 36

195,000

Value of land, Form 8829, line 37

20,000

Year the home office was first placed in service

1991

Mortgage interest

$6,250

Real estate taxes

2,400

Homeowner's insurance

680

Utilities

3,200

The Appses own a four-unit apartment building that they actively manage.They paid $150,000 for the building in 1994.Of this amount, $25,000 was allocated to the land.The Appses use MACRS to depreciate the building, which is located at 19 Sunset Road inCarlock, IL60501.

All units were rented for the entire year.Information on the apartments is shown below.

Rental revenue

$33,600

Rental expenses:

 

Real estate taxes

4,800

Utilities

1,780

Insurance

1,550

Cleaning and maintenance

5,200

Legal and professional fees

125

Mortgage interest

7,200

Repairs

827

Supplies

325

The Appses had other income consisting of the follow.Neither Jerry nor Janet had any interest in a foreign trust or bank account.

Interest from Champion Savings

$2,750

Interest on bonds from the State of Illinois

930

Qualified dividends from General Morris Corporation

425

Qualified dividends from Eagle Corporation

150

Qualified dividends from Roper Corporation

650

The Appses have a $4,950 long-term capital loss carryover from 2014.They also sold the following shares of common stock during 2015.No cost basis was provided on any of the Forms 1099-B.

Number of shares

 

Company

Date Acquired

 

Cost

 

Date Sold

Sales Price

100

Roper Corp.

5/1/09

$5,000

6/12/15

$7,500

50

Fastco Corp.

2/14/15

3,250

7/20/15

2,950

200

Eagle Corp.

3/16/11

6,200

8/10/15

8,100

100

South Corp.

3/14/14

1,500

1/24/15

6,500

A summary of the unreimbursed payments the Appses made during the year includes:

 

Jerry

Janet

David

Edwin

Total

Prescription meds

$50

$200

$25

$1,000

$1,275

Doctor bills

60

500

30

200

790

Dentist bills

150

40

200

0

390

Hospital bills

0

1,800

0

2,100

3,900

Transportation

8

72

24

16

120

Eyeglasses

0

122

125

0

247

Over the counter meds

0

50

30

70

150

Taxes:

Sales tax

$1,200

Balance due on 2014 state income tax return

25

Balance due on 2014 federal income tax return

725

Real estate taxes

2,400

Interest:

Mortgage interest

$6,250

Credit card interest

975

Cash contributions:

Church

$2,300

United Way

250

Presidential election campaign

50

In addition to the cash contributions, the Appses donated five shares of S&W common stock to their church on July 30. The stock had been purchased on December 15, 2013, for $2,200. The fair market value of the stock on July 30 was $6,000.

Janet and Jerry each contribute the maximum amount allowed for 2015 to their respective traditional IRAs.

They also make the following other payments during the year:

Rental of safe deposit box for securities

$120

Tax preparation fee (2014 Form 1040)

524

Jerry's union dues

1,200

Automobile registration

150

Attachment:- thevan_2011.zip

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Taxation: The instructions to this cumulative problem - the forms
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