2017 INFORMATION - MICKEY AND JENNY MCDONALD

Mickey - birth date 1/1/1970 SSN: 111-22-3333 Jenny - birthdate 2/2/1972 SSN 222-66-8888 Ronnie, son, birthdate 2/2/2012 SSN 333-44-5555

Income:

See W-2 for Mickey

Interest Income from Bank of America $1,200

Interest income from State of Maryland Bond $600

Dividends from Mickey's Burger Palace - See Form 1099 DIV

100 shares of Mickey's Burger Palace - bought on 1/1/2007 for $10,000, sold 7/1/17 for $6,000 - the basis was reported to the IRS.

Jenny works as a self-employed accountant:

Cash Receipts: $20,000 Plus the last 4 digits of your social security or student identification number

(Example, if your social security number is 410-34-7859 then your income would be 20,000 +7859= $27,859)

Expenses:

Supplies $1,000

Postage $500

Meal and Entertainment expenses $1,600

On July 1, 2017 she bought a new computer for $3,000- it is used 100% for her business

Other information:

Mortgage Interest paid $16,000 (on their principal residence)

Real Estate tax paid $4000 (on their principal residence)

They paid $4,000 to a roofer to replace the roof after a heavy rainfall (on their principal residence)

On April 15, 2017, they paid $500 to the State of Maryland for income tax owed to Maryland when they filed their 2016 income tax return

Credit card interest paid $200 Charitable donations $1800 cash Clothing donated to Goodwill $300

They own a rental property, a house at 12 Main Street, Rockville, Maryland.

They rent the house out to a family who paid them $1000 per month in rent for all 12 months of 2017.

The tenants paid all the utilities, the McDonald paid the real estate taxes of $3000.

The McDonalds paid $300 to repair a window that had broken in the house.

The McDonalds bought the house on January 1, 2015 for $200,000. The building represented 75% of the value and the land is 25% of the value when they purchased the property.

Go to IRS.Gov and print out forms needed: Form 1040, Schedules A,B,C,D,E and SE and Form 4562. Prepare the tax return for the McDonalds for 2017 and answer the following question:

1. How much can Jenny contribute to a SEP plan? How much would the tax liability of the McDonald's be lowered if she makes the maximum SEP contribution?