2019 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 $1,600

Interest income from State of Maryland Bond $800

Dividends from Mickey's Burger Palace See Form 1099 DIV

100 shares of Mickey's Burger Palace bought on 1/1/2007 for $12,000, sold 7/1/19 for $7,000 the basis was reported to the IRS.

Jenny works as a self-employed accountant:

Cash Receipts: $30,000 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 30,000 +7859= $37,859)

Expenses:

Supplies $1,800

Postage $200

Business Meal Expenses $800

Business Entertainment expenses $1,000

On July 1, 2019 she bought a new computer for $2,000 it is used 100% for her business (use MACRS) On November 1, 2019 she bought a new desk for $3000 it is used 100% for business (use MACRS)

She also sold her old computer for $700 on June 3, 2019 she had bought it on 4/1/2015 for $1500 and has depreciated in using the MACRS half year convention with 100% business use until she sold it.

Her office in the home is 200 square feet.

Other information:

Mortgage Interest paid $18,000 (on their principal residence)

Real Estate tax paid $5000 (on their principal residence)

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

On April 15, 2019, they paid $400 to the State of Maryland for income tax owed to Maryland when they filed their Z01 income tax return see 2018 Schedule A attached.

Credit card interest paid $300

Charitable donations $2,400 cash to the Red Cross

Donation of $500 to the Jones family who lost their home in a fire.

Clothing donated to Goodwill $450

They made a cash gift of $5000 to Mickey's mother.

They paid $8000 out of pocket (not covered by insurance) to an orthodontist for braces for Ronnie.

They own a rental property, a house at 12 Main Street, Rockville, Maryland, 20850.

They rent the house out to a family who paid them $1500 per month in rent for all 12 months of 2019.

The tenants paid all the utilities, the McDonald paid the real estate taxes of $2500.

The McDonalds paid $400 to repair a window that had broken in the rental house.

The McDonalds bought the house on January 1, 2015 for $200,000. The building represented 80% of the value and the land was 20% of the value when they purchased the property.

Go to IRS.Gov and print out forms needed: Form 1040, Schedule A, B, C, D, E and SE and Forms 4562 (2X) and Form 4797.

Prepare the tax return for the McDonalds for 2019 and answer the following question:

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