ACCT 3200; TAX RETURN PROJECT; SPRING 2017

Roger B. and Jennifer T. Allen (ages 43 and 41) are married and live at 3542 Main Street, Mt Pleasant, SC 29464. Roger is an engineering manager at Low Country Oil Corporation, located at One Atlantic Place, Charleston, SC 29424 (Federal ID# 46-2222222 and State ID# 456321). Jennifer is a self-employed occupational therapist. Their phone number is 864-555-5555. They use the cash basis for income tax purposes.

Low Country Oil Corporation refines crude oil into gasoline and other petroleum products and has refineries in South Carolina and Georgia. Roger is the manager of the South Carolina facility and has a base salary of 105,000. His company has a qualified 401-K retirement plan to which Roger contributed $5,000 of his base salary which is reported in Box 12 of his W-2 with Code D. The company also has a health insurance plan (not an HSA plan) of which Roger contributes $2,500 of his pay (after tax) toward his insurance premiums for family coverage. The company pays the remaining $9,000 of his premium payments. Low Country Oil also provides all of its employees with group term life insurance with a death benefit equal to their base salary. The cost of providing this life insurance to its employees is $4.00 per $1,000 of insurance coverage so the company added $200 to his W-2 (shown in box 12 with code C) base salary that represented the taxable portion of group life insurance.

Low Country Oil generally reimburses its employees for employment-related expenses. However, Roger did incur some costs in 2016 that were not reimbursed. They included:

Subscriptions to professional oil & gas journals $240

Registration to a oil & gas conference in Mt. Pleasant, SC $230

Annual dues to a professional organization to which he belongs $180

Dinner meetings with members of the professional organization (10 meetings during the year that includes meals & tips) $800

Roger was approached by a career headhunter during the year soliciting his interest in researching other job opportunities. Because of the recent growth in the oil and gas industry, Roger spent the following amounts in connection with a potential job search.

Preparation of professional resume and reference letters $2,000

Employment Agency Fee $4,600

Expenses in connection with 2 job interviews $2,500

Roger received an offer from one company but decided against changing jobs when Low Country Oil offered him a $25,000 raise to his base salary to become effective January 1, 2017.

Jennifer is a self-employed state-licensed speech therapist specializing in stroke victim rehabilitation. She is paid directly by nursing homes after submitting invoices to them documenting her services. She uses the cash method of accounting. In 2016, she collected $48,500 from the nursing homes. Of this amount, $4,500 was collected in January, 2016 for services performed in December, 2015. She billed $5,800 of services in December, 2016 which she collected in January, 2017.

Jennifer has no specific office, but travels to nearby nursing homes where she generally conducts her therapy sessions and returns home each evening. She had the following business expenses paid in 2016. She is covered by health insurance under Rogers family policy.

State business license $450

Medical Supplies $3,600

Liability (malpractice) insurance $6,500

Office Supplies and Expenses $900

Membership dues to professional organizations $400

Business meals with nursing home personnel (discussing patients) $250

Also, Jennifer drove the family Dodge SUV (purchased and placed in service on June 1, 2014) a total of 3,000 miles in 2016 in connection with her work which she can document with a mileage log. Total mileage driven on the SUV was 14,000 miles for the year. She did not keep repair records or gas receipts. (The Allens have another vehicle they use for 100% personal use.) Jennifers business activity code is 621340.

Jennifers widowed mother, Sophia Jones died on January 10, 2016 from complications resulting from a stroke. As her sole heir, Jennifer inherited her property which consisted only of cash in a savings account of $10,000, her home (with no mortgage). The home was located at 5432 Spalding Avenue, Anderson, SC 29689. Information located by Jennifer regarding her mothers home is as follows:

Asset Original Cost Est. FMV on January 10, 2016

Lot $15,000 $30,000

House $100,000 $250,000

Because the real estate market was depressed in Anderson, SC at the time and the home was located in a desirable area, Jennifer decided to rent the property. Jennifer spent $500 painting and making minor repairs prior to leasing. A rental real estate location service found a tenant who signed a 1-year lease beginning June 1, 2016 at $2,400 rent per month. The lease terms required the first and last months rent to be paid up front, and a $2,400 damage deposit (for a total of $7,200 due upon signing of the lease). All monthly rents were paid on the first of the month throughout the lease term. Jennifer paid the following expenses relating to the rental house:

Real estate taxes $3,200

Property repairs during rental period $4,400

Renters Location Service $500

Property Insurance $1,200

You may ignore depreciation for this property.

While jogging in August, 2016, Roger was struck by a pizza delivery driver and seriously injured. After being hospitalized for a week, he was released with no permanent impairment. The driver was arrested by the police for reckless driving and later prosecuted for drug use. To avoid adverse publicity of a lawsuit, the owner of the pizza company paid for Rogers medical expenses directly to the hospital, and also sent him a check on October 20, 2016. The check included a letter from the owners attorney that stated that $80,000 is a settlement for physical injuries sustained. Roger accepted the check and did not pursue the lawsuit.

In June, 2016, the Allens were audited by the South Carolina Department of Revenue for the tax year 2013. Due to an inadvertent oversight, some investment income was not reported. The state assessed additional taxes of $300 and a penalty of $50, of which they paid July 15, 2016. (No interest was assessed in conjunction with the audit).

The Allens had the following property transactions during 2016:

On October 20, Roger sold an antique automobile for $31,000 that had been given to him by his mother and father as a gift on February 9, 2008 (his birthday) when it was worth $20,000. His parents basis in the automobile was $9,000 (dating back to 1985).

On September 2, Roger sold 1,000 shares of Skyway Airlines common stock for $1,200. The stock was purchased November 20, 2015 for $14,000 based on a tip from one of Rogers neighbors who had heard the company was to be acquired by a major airline. The acquisition never materialized and the stock price plunged. The cost basis was reported to the IRS.

The Allens had a long-term capital loss carryover from 2015 of $6,500 arising from some stock losses in prior years.

During 2016, Roger was called to jury duty. As a result of the service, he was paid $300.

During 2016, the Allens had the following receipts:

Life insurance proceeds of $50,000 received by Jennifer in June from a policy owned by Sophia naming Jennifer as the beneficiary.

Proceeds from a garage sale that included Sophias personal items; $1,500

Interest income from a joint savings account at First United Bank of $900; and interest from City of Charleston Water and Sewer Bonds of $950 (both reported on Forms 1099).

Ordinary dividends from South Carolina Electric Company of $1,350 on common stock owned by Jennifer and reported on Form 1099. All of the dividends were reported as Qualified dividends.

Refund of 2014 South Carolina state tax of $475

Jennifers mother, Sophia had suffered a stroke in December, 2015 (which contributed to her death on January 10, 2016). Part of Sophias medical expense was covered by Medicare, but Jennifer absorbed the remaining balance. On February 27, 2016, she paid the balance of $10,200 to the hospital of which $5,000 was attributable to 2015 and the remainder was for 2016. Even though Sophia lived in her own home, she qualified (and had been properly claimed) as Rogers and Jennifers dependent for the past 5 years. Jennifer also paid Sophias funeral expenses which amounted to $8,500.

In addition to the items already mentioned above, The Allens paid several other expenses during 2016 as outlined below:

Mortgage interest on residence (paid to First United Bank) $8,900

Real estate taxes on residence $3,650

Doctor and Dentist Bills (not covered by insurance) $2,650

Cash Contributions to church $2,200

In addition, the Allens participated in several Habitat for Humanity housing projects sponsored by their church. They logged 200 miles for this activity. In addition, they drove 290 miles for medical-related purposes. The Allens have itemized their income tax for many years. Their total itemized deductions for 2015 were $22,500 which included $3,500 for real estate taxes and $4,000 for state income taxes.

Rogers 2016 W-2 Form reflects his proper amount of taxable income ($100,200 in box 1) and social security tax and medicare tax withheld from his earnings ($6,510 in box 4 and $1,522.50 in box 6 respectively). In addition, he had federal income tax withholding of $10,100 and $4,200 of South Carolina income tax withheld. The Allens made quarterly estimated federal tax payments of $1,500 per quarter and quarterly estimated state tax payments of $500 per quarter. All payments were made on the due dates except for the 4^th quarter estimates which were paid on December 30, 2016.

The Allens household includes two dependent children, Amy (age 15) and Matthew (age 10). Matthew attends a private school because he has a mild attention disorder and Jennifer feels he performs better in smaller classes that provide more individual attention. Tuition cost of the private school is $15,000 per year. In addition, Jennifer made a $5,500 contribution to her Traditional IRA in November, 2016. The Allens do not have any foreign bank accounts.

Name Social Security Number Date of Birth

Roger B. Allen 123-45-6788 2/9/1973

Jennifer T. Allen 123-45-6787 12/8/1975

Sophia Jones 123-45-6786 7/17/1941

Amy A. Allen 123-45-6784 4/12/2001

Matthew R. Allen 123-45-6782 8/30/2006