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Spring 2019 ACC320 Tax Problem.
Some hints:
1. How many exemptions?
2. How much do they have in rental income?
3. How much do they have in business income?
4. What is NOT included in their income? Go through the info and determine
what is included and what is not included!
5. Figure out their income and do a tax return using 2018 tax forms.
6. They had medical insurance the whole year. No penalty!
7. **Here are the forms you need to upload-1040 page 1 and 2, Schedule 2,3,4 and
A,B,C,D, Tax worksheet, E, SE, 2441, Child credit and other dependent credit,
QBID.
8. If these forms are not present, the return is not complete. If more than these is
present, the return is not correct. Please compare this list to your return before
sending to me. Thank you for your help.**
Yes everything happened is listed, but NOT everything goes on their tax return.
Mark Smith (1/1/1975) and Sally Smith (1/2/1974) have hired you to do their 2018
income tax return. They live at 10210 Old Main Street in Mount Olive. His social
security number is 111-11-1111 and hers is 222-22-2222. They have several people they
take care of: Joshua (1/3/1998), their son, is 20 and a full time college student-a junior;
His social security number is 333-33-3333 and he earned $2,700 last year. He lives on
campus but he paid for that himself, but his parents paid for his tuition at UMO.
Benjamin (1/4/1993), their son, is 25 and fully disabled and his social security number is
444-44-4444. He earned $5,000 and lives with the Jackson’s. Their daughter Rachel
(1/5/2013) is 5 and her social security number is 555-55-5555. They paid The ABC Day
Care in Mount Olive $6,000 to help watch and care for Rachel while they work. Their
Federal tax id is 52-9876543. They also take care of and fully support Mark’s motherMelanie Smith (1/10/1950) in Florida and her social security number is 666-66-6666.
They also fully support Sally’s cousin, Monica Jackson (1/9/1980), which lives in
California. Her social security number is 777-77-7777. You must figure out the number
of dependents!(DOB in parentheses)
Mark has a salary job working at the University of Mount Olive as a professor making
$85,000 and they withheld $8,000 in federal income taxes and $4,000 in state income
taxes. Mark paid alimony of $12,000 and child support of $6,000. Sally received alimony
of $6,000. Both of them have pre-2018 alimony agreements (This should tell you
something!) Mark and Sally have rental property and Sally is a local Business owner.
The family had health insurance coverage the entire year. No penalty to calculate.
The rental info is:
1. House in Florida. They have rented the house in 9 previous years (began
1/1/2010) and they rented in out all year. The house is worth $100,000 and the
land is $50,000 for a total of $150,000. Income and Expenses listed below.
2. They have a 2nd rental in South Carolina that only rented for 13 days and the
income was $5,000 with no expenses. They have rented this property for 7 years
and it was purchased for $100,000 with land valued at $25,000.
Income from FL:
Advertising
Mortgage interest paid
Real estate taxes
Utilities
Insurance
Repairs
Management fees
$20,000
$1,200
$6,000
$2,400
$1,400
$1,800
$2,300
$1,200
Business Information on Sally
Sally’s business income for the year was $40,000. She had the following expenses:
Liability insurance
Software rental
Journals
Training
Advertising
Supplies
Postage
Cellphone
Website
$1,800
$9,500
$1,250
$1,500
$2,400
$3,400
$1,200
$2,400
$2,000
Her purchases in January 1, 2018 of property are as follows:
1. Computer
5 year
$2,000
2. Office Furniture
7 year
$5,000
3. Also, she brought an office condo on January 1, 2012. She brought it for
$100,000, $70,000 for the building and $30,000 for the land.
She elected: NO BONUS and NO Section 179.
Here are some other events that happened in the life of the Smith’s this year:
Reminder everything happened is listed, but NOT everything goes on their tax return!
Hint-Go through the information and delete out what does apply to their tax return!
Then input everything else!
1. Received interest from Bank of America of $1,800.
2. Received tax exempt interest of $1,700 from the State of North Carolina.
3. Received dividends from Ford Motor Co. of $2,400.
4. Mark did jury duty and received $50.
5. Mark’s uncle died and the insurance company left him $500,000.
6. When his uncle died he also left Mark some ABC co. stock which he purchase for
$2,000 back in 1988. The stock had a FMV of $20,000 on the date of death 7/1/18. Mark
sold it for $30,000 on 12/31/18.
7. Mark purchase some stock in February 28, for $17,000 and it was going south, so he
sold it in October 31, for $1,000.
8. Mark sold one old car for a loss of $2,000.
9. Sally had gambling winning s of $7,000. She also has gambling losses of $9,500.
10. Medical insurance premiums paid were $12,000 by Mark on his job.
11. Therapist bills for Benjamin were $500
12. Other Doctor and dentist bills were $3,000
13. Over the counter medicine purchased was $2,800
14. Mortgage interest paid on their home was $6,000
15. They paid $8,000 interest on their personal auto loan.
16. They paid $1,800 for prescriptions.
17. Real Estate taxes paid on their home was $3,800
18. The paid personal property taxes of $500 and it was based on value of property so
include it.
19. They gave $12,500 to charity/church and have a statement.
20. They paid credit card finance charges of $3,000
21. They made political donations of $5,000
22. They paid $1,000 for tax preparation last year. $600 was for Sally’s business.
23. Mark paid union dues of $1,500
24. Mark also had job expenses of $3,000 that he paid out of pocket-not reimbursed.
25. Mark helped out a friend at work by giving him $3,500. He wants to know if its
charity?
26. Sally paid for the medical expenses of a close friend $5,000.
27. Mark gave another old car to charity. FMV was $500 on 1098C.
28. Mark elected to put $5,000 in a Traditional IRA. Sally elected to put $5,000 into a
ROTH IRA. Neither has a retirement plan thru an employer.
29. Mark paid $4,000 to Sallie Mae for student loan interest.
30. They withdrew a bank CD and paid an early withdrawal penalty of $75.
…
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