ADVANCED TAX CONCEPTS
Competencies:
Tax Planning - The graduate applies knowledge of tax laws for planning and compliance purposes.
Multijurisdictional Tax Issues - The graduate analyzes the impact of multijurisdictional taxes including federal, state, local and international taxes.
Federal Taxation of Property Transactions - The graduate determines the proper tax treatment for business transactions such as capital gains, the sale of a residence and gifts.
Tax Return Preparation - The graduate prepares federal tax returns with IRS forms, schedules, and related reporting requirements.
Task: Personal Tax Return
Scenario:
Jason and Judith Aollinger have hired you to prepare their 2014 federal income tax return. Jason is a self-employed artist, and Judith owns 20% of Imelda Company, an S corporation. Jason received the Form 1099-MISC and has provided the document titled Items of Income and Expense from his business, and Judith has received the Schedule K-1 and Form W-2. These documents are included in "Client Organizer Task 2" attachment. As you help the Aollingers with their taxes, use tax methods that minimize taxable income.
These are the Social Security numbers (SSN) and dates of birth (DOB) for Jason and Judith:
The Aollingers have three children:
- Janey (SSN 345-67-8901; DOB 7/1/1995)
- Johnny (SSN 234-56-7890; DOB 2/4/2003)
- Jeremy (SSN 456-78-9012; DOB 9/30/2010)
Janey is a student at a local college and provided her parents with forms 1098-T and 1098-E, included in the "Client Organizer Task 2" attachment. Jeremy goes to daycare at Ms. Sunshine Florida's home located at 123 Balmy Drive, Key West, FL 33040. Ms. Florida's SSN is 541-77-7777. The couple also paid Johnny $2,000 to watch Jeremy over the summer when school was out of session.
Judith's mother, Mary Renault, lived with the family until November 2014. Mary's income was a $112 per month pension and $660 in Social Security benefits. Her SSN is 123-12-4567 and DOB 6/25/1932. Mary's Social Security benefits were deposited directly to a savings account, which she did not spend. Mary spent her income as she chose and did not reimburse Judith for any of the costs associated with her stay.
Jason was covered in a Marketplace individual health insurance plan from January 1, 2014, through August 31, 2014. He obtained private coverage on October 1, 2014, and remained covered throughout the rest of the year. He received an advance payment of premium tax credit in the amount of $1,454 per month from January 2014 through August 2014. When he signed up through the marketplace, Jason underestimated his income and therefore received too big of a subsidy from January 2014 through August 2014. He was not covered under Judith's plan, but the children were covered under Judith's plan.
The couple rents their former home at 3456 Abbey Road, Key West, FL 33040. They purchased the house on November 30, 1998, and lived in it until March 20, 2011. The property was rented for all of 2014. The total income on rental property was $14,400. At purchase, they paid $175,000 for the house and land combined. They believe the value of the lot at that time was $40,000. The home is 1,330 square feet. The mortgage interest is $5,850, and real estate taxes are $3,200.
The current family home was purchased on March 20, 2011, for $320,000 for the house and land combined. They believe the land was worth $90,000 at that time. The home is 2,850 square feet. The sunroom is used by Jason as his studio. The sunroom is 320 square feet. The mortgage interest is $14,400, and real estate taxes are $3,100.
Judith purchased 2,000 shares of Corporation E stock on July 31, 2009, at $14 per share. She sold them on June 30, 2014, at $20 per share and paid a $50 transaction fee. The couple had a long-term capital loss carryover from their 2013 tax return of $23,000.
The couple would like to contribute the maximum amount to their health savings account, Jason's SEP IRA, and each of their ROTH IRAs during the year. Jason pays $500 in spousal support and $1,000 per month in child support to his ex-wife Regina Cox (SSN 401-01-1001).
Jason made estimated payments of $300 per quarter. All estimated tax payments were made on time.
The couple also paid other expenses listed in the Items of Income and Expense document in the "Client Organizer Task 2" attachment.
Requirements:
A. Submit a completed Form 1040 for Mr. and Mrs. Aollinger's 2014 federal income tax return, including all supporting forms, schedules, and statements but excluding worksheets.
1. Complete pages 1-2 of Form 1040 for the Aollingers' 2014 federal income tax return.
a. Include the correct number for "Ordinary Dividends" on line 9a.
b. Include the correct number for "Qualified Dividends" on line 9b.
c. Include the correct number for "Total Income" on line 22.
d. Include the correct number for "Health Savings Account Deduction" on line 25.
e. Include the correct number for "Qualified Plans Adjustment" on line 28.
f. Include the correct number for "Adjusted Gross Income" on line 37.
g. Include the correct number for "Itemized Deductions" on line 40.
h. Include the correct number for "Exemptions" on line 42.
i. Include the correct number for "Taxable Income" on line 43.
j. Include the correct number for "Tax" on line 44.
k. Include the correct number for "Excess Advance Premium Tax Credit Repayment" on line 46.
l. Include the correct number for "Total Credits" on line 55.
m. Include the correct number for "Health Care" on line 61.
2. Complete Schedule A for the Aollingers.
a. Include the correct number on line 4.
b. Include the correct number for "State and Local" on line 5.
c. Include the correct number for "Real Estate Taxes" on line 6.
d. Include the correct number on line 9.
e. Include the correct number for "Home Mortgage Interest" on line 10.
f. Include the correct number on line 15.
g. Include the correct number for "Gifts by Cash or Check" on line 16.
h. Include the correct number on line 19.
3. Complete Schedule C for the Aollingers.
a. Include the correct number for "Gross Income" on line 7.
b. Include the correct number for "Total Expenses" on line 28.
c. Include the correct number for "Expenses for Business Use of Your Home" on line 30.
4. Complete Schedule D for the Aollingers.
a. Include the correct number for "Net Long-Term Capital Gain or (Loss)" on line 15.
b. Include the correct number on line 21.
5. Complete Schedule E for the Aollingers.
a. Include the correct number for "Depreciation Expense or Depletion" on line 18.
b. Include the correct number for "Total Rental Real Estate and Royalty Income or (Loss)"on line 26.
c. Include the correct number for "Total Partnership and S Corporation Income or (Loss)" on line 32.
6. Complete Schedule SE for the Aollingers.
a. Include the correct number on line 3.
B. When you use sources, include all in-text citations and references in APA format.'
Assignment Files -
https://www.dropbox.com/s/jhlbr4a07fahccd/Tax%20Return%20Problem%20Assignemnt.rar?dl=0