Rhett and Scarlett Butler provide you with the following information for 2015:
Rhett SS # 222-33-1234
Scarlett SS # 111-22-1234
Address: 1436 Franklin Pike
Slippery Rock, PA 16057
Occupation
Rhett Horse Trader
Scarlett Self-Employed
Rhett and Scarlett have two children
Bonnie, SS# 444-55-6666 who is 20 years old and a student at Slippery Rock University
Clyde, SS# 666-55-4444 who is 15 years old
In addtion Scarlett’s father Mike O’Hara (SS# 111-11-1111) lives with them. Mike’s only source of
income is his Social Security
Income information
Gross FWT SS MC State WH Local WH
Rhett’s W2 70,000 8,250 4,340 1,015 2,149 700
Interest income
City of Slippery Rock 1,000
First Choice FCU 500
First National Bank 1,000
Ford Motor Co 250
TIP: Some of the interest income may be tax exempt
Dividend income Ordinary Qualified
Amazon 500 500
AT&T 1,000 1,000
Conn Welding Co 300 Note, Not qualified
Microsoft 1,000 1,000
NOTE: Rhett and Scarlet DO NOT have an interest in a foreighn account or receive a
distribution from a foreign trust
ACCT 308 – Individual Income Tax
FINAL EXAM
Capital Gains
On 2/14/2005 Rhett and Scarlett bought 100 shares of Microsoft for $26 per share plus a commission
of $50. On 7/31/15 the sold all 100 shares for $43 per share less a commission of $100.
On 1/15/15 the bought 100 Shares of Big Sky Mining for $2,000. On 9/15/15 they sold the Big Sky
for $1,500.
NOTE Short-term gains or losses are reported in Part I of Form 8949
Long-term gains or losses are reported in Part II
Assume that box A or D is checked.
Business Income
Scarlett operates an arbitration service known as Scarlett’s Settlements. During 2015 her business
income and expenses were:
Fees 125,000
Expenses
Advertising 3,000
Car and truck 5,500
Contract labor 20,000 1099s required, assume they were issued.
Depreciation FROM FORM 4562
Insurance 6,000
Legal and professional fees 1,500
Office expense 3,000
Rent of office space 12,000
Repairs and maintenance 1,200
Taxes and licenses 500
Travel 1,500
Meals and entertainment 4,500 2,250
Utilities 6,200
NOTE Use business code 561110
TIP: Meals and entertainment are limited
During the year Scarlett pruchased the following equipment for use in the business
3/15/2015 Computer equipment costing $5,000 5 year property used
10/15/2015 Office furnishings costing $15,000 7 year property
ACCT 308 – Individual Income Tax
FINAL EXAM
Scarlett elects to take the section 179 deduction for the office furnishings
TIP: Does mid-quarter convention apply?
Scarlett paid $2,400 for health insurance premiums during the year. She is not covered by Rhett’s plan.
Scarlett contributed $5,000 to her self-employed retirement plan during the year
Rhett and Scarlett own and rent a single family dwelling located at 123 Main Street, Grove City PA
During 2014, rental income and expenses were:
Rent 18,000
Cleaning and maintenance 1,000
Commissions 900
Insurance 2,500
Legal fees 500
Mortgage interest 4,800
Repairs 1,500
Taxes 3,500
Utilities 2,400
Depreciation 2,700
TIP: Form 4562 is not required for the rental property
TIP:No payments that required a 1099
Itemized deductions
Medical
Doctors 3,000
Dentists 1,500
Emergency room fee 500
Ambulance for Scarlett’s father 250
Nose job for Scarlett 2,500
Health insurance for Rhett and the children 5,000
Prescription drugs for Scarlett’s father 1,500
Taxes
Real Estate taxes 4,800
Interest expense
ACCT 308 – Individual Income Tax
FINAL EXAM
Home mortgage interest 6,200
Home equity loan 1,000 (Proceeds used for a Harley Davidson)
TIP: Is the home equity interest an AMT trigger?
Contributions
The Chruch of What’s Happening now 3,000
Unitedway 500
In addition to their cash conttributions, Rhett and Scarlett gave their neighbor Ashley $500 because
his house burned down and they wanted to help.
They also donated Exonmobile stock to the Salvation Army. The stock had a basis of $1,000 and
Fair Market Value of $5,000
TIP: Form 8283 is NOT required,just list on line 17 of Schedule A
Miscellaneous Expenses
Tax preparation fees 2,500
Other
Rhett and Scarlett paid $10,000 for Bonnie’s tuition during 2014
TIP: Form 8863 is required.
Estimated payments made during 2014
Federal 5,000
State 1,000 TIP: Include with state and local taxes on line 5 of Schedule A
TIP: State estimated payments are deductible in 2014
REQUIRED: PREPARE RHETT AND SCARLETT’S 2015 TAX RETURN INCLUDING THE
FOLLOWING FORMS AND SCHEDULES”
Form 1040, Sch A, Sch B, Sch C, Sch D, Sch E, Sch SE
Form 4562
Form 8863 Page 1and 2
Form 8949 Page 1and 2
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