7. The Dunphys made timely estimated federal income tax payments of S10.000 each quarter during 2018. They also made estimated state income tax payments of S1.000 each quarter and estimated city income tax payments of S100 each quarter The Dunphys made all fourth quarter payments on December 31, 2018. They would like to receive a refund for any overpayments. 8. Phillip and Claire have qualifying insurance for purposes of the Affordable Care Act (ACA). INDIVIDUAL TAX RETURN PROBLEM 5 Required: . Use the following information to complete Armando and Lourdes Gonzales's 2018 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps. Any required forms, schedules, and instructions can be found at the IRS website (www.ins.gov). The instructions can be helpful in completing the forms. Facts: 1. Armando Z. and Lourdes K. Gonzales are married and file a joint return. Armando is self-employed as a dentist, and Lourdes is a college professor. Armando and Lourdes have three children. The oldest is Ricardo, who lives at home. Ricardo is a law student at the University of Cincinnati and worked part time during the year. earning S1.500, which he spent for his own support. Armando and Lourdes pro vided $6,000 toward Ricardo's support (including $4,000 for Ricardo's fall tuition). They also provided over half the support of their daughter, Selena, who is a full- time student at Edgecliff College in Cincinnati, Selena worked part time as an inde- pendent contractor during the year, earning S3.200, Selena lived at home until she was married in December 2018. She filed a joint return with her husband, Tony, who earned $20,000 during the year. Felipe is the youngest and lived in the Gonzales's home for the entire year. The Gonzaleses provide you with the following additional information: Armando and Lourdes would like to take advantage on their return of any educa tional expenses paid for their children. The Gonzaleses do not want to contribute to the presidential election campaign. The Gonzaleses live at 621 Franklin Avenue, Cincinnati, Ohio 45211. Armando's birthday is 3/5/1961 and his Social Security number is 333-45-6666. Lourdes's birthday is 4/24/1963 and her Social Security number is 566-77-8888. Ricardo's birthday is 11/6/1995 and his Social Security number is 576-18-7928. Selena's birthday is 2/1/1999 and her Social Security number is 575-92-4321. Felipe's birthday is 12/12/2006 and his Social Security number is 613-97-8465. The Gonzaleses do not have any foreign bank accounts or trusts. 2. Lourdes is a lecturer at Xavier University in Cincinnati, where she earned $30,000. The university withheld federal income tax of $3.375, state income tax of $900, ncinnati city income tax of $375, 51,860 of Social Security tax, and $435 of Medicare tax. She also worked part of the year for Delta Airlines. Delta paid her $10,000 in salary, and withheld federal income tax of $1,125, state income tax of $300. Cincinnati city income tax of $125, Social Security tax of $620, and Medi- care tax of $145. 3. The Gonzaleses received $800 of interest from State Savings Bank on a joint ac- count. They received interest of $1,000 on City of Cincinnati bonds they bought Id 200 shares of minus a 550 com ndo's father on originally purch the stock was vale paid on their 7. Arman Appendix C C -7 200 48.000 4. Phillip's full-time real estate business is named "Phillip Dunphy Realty.His busi- ness is located at 615 Grove Street, Los Angeles, California 90018, and his em ployer identification number is 93-3488888. Phillip's gross receipts during the year were 5730,000. Phillip uses the cash method of accounting for his business. Phillip's business expenses are as follows: Advertising 5.000 Professional dues 800 Professional journals Employee wages Insurance on office contents 1,120 Accounting services Miscellaneous office expense 500 Utilities and telephone 3.360 Payroll taxes 3.600 Depreciation To be calculated On March 20, Phillip moved his business out of the old offices at 1103 Allium Lane into a newly constructed and equipped office on Grove Street, Phillip sold the old office building and all its furnishings. Phillip's expenditures for the new office building are as follows: 2.100 Date Acquired Asset 3/20 Cost $ 300.000 2 500.000 200.000 350.000 150 000 Omice building Furniture Computer system Artwork 3/20 6/1 Phillip computes his cost recovery allowance using MACRS. He would like to use the $179 immediate expensing, but he has elected to not claim any bonus deprecia- tion. Phillip has never claimed $179 or bonus depreciation before. The assets Phillip sold on March 20 are as follows: Date Acquired Original Cost Asset Sales Price Accumulated Depreciation as of Beginning of the Year $129,825 5/1/12 5/1/12 7/1/12 B/13/14 4/12/15 5/13/16 Office building Land Furniture Furniture Office equipment Computers $940,000 150.000 50.000 10.000 100,000 30,000 $900.000 100.000 239.000 324,000 120,000 50,000 206,998 222.782 67.524 10,000 Phillip has never sold any assets relating to his business before this transaction. 5. The Dunphys sold 60 shares of Fizbo Corporation common stock on September 3 for $65 a share (minus a S50 total commission). The Dunphys purchased the stock on November 8, 2017, for $90 a share. They also sold a painting for $13.000 on March 1. Claire purchased the painting for $20,050 on September 1, 2011, as an investment. 6. The Dunphys filed their 2017 federal, state, and local returns on April 13, 2018. They paid the following additional 2017 taxes with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75. -10 Appendix C o The Gonzaleses sold 200 shares of Cape Coration stock on September 3, 2018. for $4 a share (minus a $50 commission) The Gonzaleses received the stock from Armando's father on June 25. 1982 as weddine present. Armando's Father originally purchased the stock for $10 per share on January 1. 197. The stock was valued at $14.50 per share on the date of the gift. No gift tax was paid on the gift. 7. Armando and Lourdes have given you a file containing the following receipts for expenditures during the year: Prescription medicine and drugs (net of insurance reimbursement) $ 376 Doctor and hospital bills (net of insurance reimbursement) 2,468 Penalty for underpayment of last year's state income tax 15 Real estate taxes on personal residence 4,762 Interest on home mortgage (paid to Home State Savings & Loan) 8,250 Interest on credit cards (consumer purchases) 595 Cash contribution to St. Matthew's church 3.080 Payroll deductions for Lourdes's contributions to the United Way 150 8. The Gonzaleses filed their 2017 federal, state, and local returns on April 12, 2018 They paid the following additional 2017 taxes with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75. 9. The Gonzaleses made timely estimated federal income tax payments of $1,500 each quarter during 2018. They also made estimated state income tax payments of $300 each quarter and estimated city income tax payments of $160 each quarter. The Gonzaleses made all fourth-quarter payments on December 31, 2018. They would like to receive a refund for any overpayments. 10. Armando and Lourdes have qualifying insurance for purposes of the Affordable Care Act (ACA). 7. The Dunphys made timely estimated federal income tax payments of S10.000 each quarter during 2018. They also made estimated state income tax payments of S1.000 each quarter and estimated city income tax payments of S100 each quarter The Dunphys made all fourth quarter payments on December 31, 2018. They would like to receive a refund for any overpayments. 8. Phillip and Claire have qualifying insurance for purposes of the Affordable Care Act (ACA). INDIVIDUAL TAX RETURN PROBLEM 5 Required: . Use the following information to complete Armando and Lourdes Gonzales's 2018 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps. Any required forms, schedules, and instructions can be found at the IRS website (www.ins.gov). The instructions can be helpful in completing the forms. Facts: 1. Armando Z. and Lourdes K. Gonzales are married and file a joint return. Armando is self-employed as a dentist, and Lourdes is a college professor. Armando and Lourdes have three children. The oldest is Ricardo, who lives at home. Ricardo is a law student at the University of Cincinnati and worked part time during the year. earning S1.500, which he spent for his own support. Armando and Lourdes pro vided $6,000 toward Ricardo's support (including $4,000 for Ricardo's fall tuition). They also provided over half the support of their daughter, Selena, who is a full- time student at Edgecliff College in Cincinnati, Selena worked part time as an inde- pendent contractor during the year, earning S3.200, Selena lived at home until she was married in December 2018. She filed a joint return with her husband, Tony, who earned $20,000 during the year. Felipe is the youngest and lived in the Gonzales's home for the entire year. The Gonzaleses provide you with the following additional information: Armando and Lourdes would like to take advantage on their return of any educa tional expenses paid for their children. The Gonzaleses do not want to contribute to the presidential election campaign. The Gonzaleses live at 621 Franklin Avenue, Cincinnati, Ohio 45211. Armando's birthday is 3/5/1961 and his Social Security number is 333-45-6666. Lourdes's birthday is 4/24/1963 and her Social Security number is 566-77-8888. Ricardo's birthday is 11/6/1995 and his Social Security number is 576-18-7928. Selena's birthday is 2/1/1999 and her Social Security number is 575-92-4321. Felipe's birthday is 12/12/2006 and his Social Security number is 613-97-8465. The Gonzaleses do not have any foreign bank accounts or trusts. 2. Lourdes is a lecturer at Xavier University in Cincinnati, where she earned $30,000. The university withheld federal income tax of $3.375, state income tax of $900, ncinnati city income tax of $375, 51,860 of Social Security tax, and $435 of Medicare tax. She also worked part of the year for Delta Airlines. Delta paid her $10,000 in salary, and withheld federal income tax of $1,125, state income tax of $300. Cincinnati city income tax of $125, Social Security tax of $620, and Medi- care tax of $145. 3. The Gonzaleses received $800 of interest from State Savings Bank on a joint ac- count. They received interest of $1,000 on City of Cincinnati bonds they bought Id 200 shares of minus a 550 com ndo's father on originally purch the stock was vale paid on their 7. Arman Appendix C C -7 200 48.000 4. Phillip's full-time real estate business is named "Phillip Dunphy Realty.His busi- ness is located at 615 Grove Street, Los Angeles, California 90018, and his em ployer identification number is 93-3488888. Phillip's gross receipts during the year were 5730,000. Phillip uses the cash method of accounting for his business. Phillip's business expenses are as follows: Advertising 5.000 Professional dues 800 Professional journals Employee wages Insurance on office contents 1,120 Accounting services Miscellaneous office expense 500 Utilities and telephone 3.360 Payroll taxes 3.600 Depreciation To be calculated On March 20, Phillip moved his business out of the old offices at 1103 Allium Lane into a newly constructed and equipped office on Grove Street, Phillip sold the old office building and all its furnishings. Phillip's expenditures for the new office building are as follows: 2.100 Date Acquired Asset 3/20 Cost $ 300.000 2 500.000 200.000 350.000 150 000 Omice building Furniture Computer system Artwork 3/20 6/1 Phillip computes his cost recovery allowance using MACRS. He would like to use the $179 immediate expensing, but he has elected to not claim any bonus deprecia- tion. Phillip has never claimed $179 or bonus depreciation before. The assets Phillip sold on March 20 are as follows: Date Acquired Original Cost Asset Sales Price Accumulated Depreciation as of Beginning of the Year $129,825 5/1/12 5/1/12 7/1/12 B/13/14 4/12/15 5/13/16 Office building Land Furniture Furniture Office equipment Computers $940,000 150.000 50.000 10.000 100,000 30,000 $900.000 100.000 239.000 324,000 120,000 50,000 206,998 222.782 67.524 10,000 Phillip has never sold any assets relating to his business before this transaction. 5. The Dunphys sold 60 shares of Fizbo Corporation common stock on September 3 for $65 a share (minus a S50 total commission). The Dunphys purchased the stock on November 8, 2017, for $90 a share. They also sold a painting for $13.000 on March 1. Claire purchased the painting for $20,050 on September 1, 2011, as an investment. 6. The Dunphys filed their 2017 federal, state, and local returns on April 13, 2018. They paid the following additional 2017 taxes with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75. -10 Appendix C o The Gonzaleses sold 200 shares of Cape Coration stock on September 3, 2018. for $4 a share (minus a $50 commission) The Gonzaleses received the stock from Armando's father on June 25. 1982 as weddine present. Armando's Father originally purchased the stock for $10 per share on January 1. 197. The stock was valued at $14.50 per share on the date of the gift. No gift tax was paid on the gift. 7. Armando and Lourdes have given you a file containing the following receipts for expenditures during the year: Prescription medicine and drugs (net of insurance reimbursement) $ 376 Doctor and hospital bills (net of insurance reimbursement) 2,468 Penalty for underpayment of last year's state income tax 15 Real estate taxes on personal residence 4,762 Interest on home mortgage (paid to Home State Savings & Loan) 8,250 Interest on credit cards (consumer purchases) 595 Cash contribution to St. Matthew's church 3.080 Payroll deductions for Lourdes's contributions to the United Way 150 8. The Gonzaleses filed their 2017 federal, state, and local returns on April 12, 2018 They paid the following additional 2017 taxes with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75. 9. The Gonzaleses made timely estimated federal income tax payments of $1,500 each quarter during 2018. They also made estimated state income tax payments of $300 each quarter and estimated city income tax payments of $160 each quarter. The Gonzaleses made all fourth-quarter payments on December 31, 2018. They would like to receive a refund for any overpayments. 10. Armando and Lourdes have qualifying insurance for purposes of the Affordable Care Act (ACA)