$1.$ record your response or questions to each of your neighbor$$s questions.

$2.$ Use the third column to note anything that you would need to record on their tax return.

$3.$ Record any event $($and amount if possible$)$ that should be considered for their taxes.

$4.$ Be complete and comprehensive in your responses

Day $32$:

Rudy comes by again. Before you can say that you have some concerns about his $$From Abroad$$ business, he tells you about another side business that he is just starting. This business, Rudy$$s insurance Co$.,$ is a small insurance sales company. He intends to hire $2$ employees by the end of the year. He spent $$6,000$ in qualifying start up costs that included computers, office furniture and supplies. Throughout the rest of the year, the costs are minimal. This business makes sense since Rudy is currently employed by an insurance company as a salesperson.

Day $33$:

You run into Charlie out front. He seems to be with some shady friends. After they leave, you confront Charlie. He seems almost proud that he is selling drugs to some of the teens in the neighborhood. He says that he has earned over $$10,000$ and his cost of good sold was only $$1,000.$ He admits that he has other expenses though of $$3,000$ for driving, security and packaging materials.

Day $34$:

Although the neighbor$$s house seemed quiet while they were gone, you find out they rented out for $10$ of the $14$ days for $$1,000.$ This is the only time this year that they rented it out.

Day $35$

Rudy takes a client to dinner related to his new start up$,$ Rudy$$s Insurance Co$.$ You see him come home and you stop to say hi$.$ What do you recommend to him with respect to the dinner in case he wants to claim it as a business expense? In addition to dinner, Rudy gave his client a $$50$ gift card to a local wine shop.

Day $37$

While you are relaxing at your firepit, Sarah and Rudy come by explain to you that they probably aren$$t going to put in a pool. They want to invest some money for retirement instead. They aren$$t sure how to do this or what the difference between a conventional IRA or a Roth IRA. What do you tell them?

Day $38$

Rudy and Sarah thank you for explaining the IRAs to them. They bring you a cake as a thank you. They also tell you that they invested the full amount into a conventional IRA $6,000$ and also the maximum for their two younger children$$s educational IRAs $($also called a CESA$)2,000$ each. How much do they invest?

Day $39$

Rudy bought too many printers for his new insurance business. He sells you one for $$500.$ He paid $$550$ for the printer one month ago. He wants to take the most depreciation expense as he can.

Day $40$

You take a walk with Sarah around the neighborhood and she points out a house that her parents had owned before they died. You find out that Sarah rents this house out and receives $$1,000$ rental income for it$.$ Her expenses average $$600$ a month. She serves as the landlord and doesn$$t use a management company. She has been the owner since August $1$st$.$

Day $41$

Sarah comes over and complains to you that Rudy had invested in this investment that didn$$t sound good to you and he ended up losing $$10,000.$ Sarah is also upset that a diamond necklace that she had inherited was stolen. What questions would you ask Sarah to know how these should be reported. Include her answers so you can create the return.

Skip some days ahead $$ you don$$t see Sarah and Rudy much because everyone is busy with school and work.

Day $90$

You are thinking ahead for the end of the year and as you expected, Rudy and Sarah see you and ask you to prepare their tax return for them. They will pay you $$500.$ They want to file Married Filing Jointly. They also just want to take the standard deduction instead of itemizing their personal deductions $($so you won$$t need a Schedule A$).$

Day $91$

You are curious if Sarah, her X$-$husband or Charlie himself can claim Charlie as a dependent. What questions would you ask her and what conclusion do you come to based on her responses.

Day $92$

You say hi to Rudy while he is digging a big envelope out of his trash can. He tells you that he accidentally threw away some receipts for business expenses of Rudy$$s Insurance Co$.$ These included:

Business insurance: $$600$

Insurance, salaries $$ arm$$s length, interest, taxes, legal fees,

Last day of the year

You need to computer Rudy$$s tax gain or loss on his Sch C$.$ You also need to find out how much they spent on day care and document that they meet the related requirements. Finally, establish if any college payments for Charlie are eligible for a credit. Sarah and Rudy don$$t have any educational themselves that would qualify for any educational credit.

Sarah sells the rental property and closes on the last day of the year.