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Alex and Phyllis celebrated their 5 th wedding anniversary and their 3 0 th birthdays this year. The couple met at the local supermarket where

Alex and Phyllis celebrated their 5th wedding anniversary and their 30th birthdays this year. The couple met at the local supermarket where they are employed full-time. The following information concerning income and possible income is provided to you concerning the couple.
1. For the current tax year, Alexs wages were $53,000 and Phylliss wages were $47,000. The couples employer provides group-term life insurance in the amount of the employees wages.
2. Ten years ago, Phyllis received an acre of land as an inter vivos gift from her grandfather. At the time of the gift, the land had an FMV of $50,000. The grandfathers adjusted basis was $60,000. Phyllis sold the land during the current tax year to an unrelated third party for $56,000.
3. The couple received a stock dividend from the Ace Corporation. The couple had the option to receive cash or the stock. They chose the stock, which had a fair market value of $900 on the date of distribution. The par value of the stock was $500.
4. The couple reviewed their bank statements and saw that they received $58 in interest on their checking and savings accounts. However, the bank did not send them a 1099-INT.
5. Phyllis received $10,000 when she redeemed her Series EE bonds during the year. Phyllis was given the bonds for her birthday 23 years ago; the cost of the bonds was $3,500. The entire $10,000 proceeds were used for college tuition by the couple during the year.
6. In May, the couple received a tax refund for overpayment of their prior years income taxes: $2,500 from the IRS and $1,250 from the state revenue department. The couples AGI was $80,000 in the prior year. The couple itemized last year because their itemized deductions exceeded the standard deduction by $950.
7. Alex and Phyllis contributed $600 apiece to their traditional IRA and another $600 apiece to their Roth IRA.
Rental Property
Alex and Phyllis also leased out two rental properties, which they solely maintain, to graduate students attending the local university. The following information pertaining to the rental properties is given:
1. Property A was rented on April 1 for $900 per month. In addition, the tenant paid $900 as a security deposit with his first rent payment. The security deposit will be returned at the end of the first year. The property was vacant during the first three months of the year.
2. Property B has been continuously rented for the past two years. The current tenant pays $750 per month. Along with his December rent, the tenant prepaid the first two months ($1,500) of next year. In addition, he made repairs to the property in lieu of paying his October rent payment.
3. The insurance policies were paid on January 3 of the current year, and they cover this year and next year.
In addition to the above rental income information, the following expenses were incurred by Alex and Phyllis on the properties:
Alex and Phyllis's Rental Property Expenses
Property A Property B
Expenses:
Advertising $ 350 $ 0
Cleaning 4250
Insurance coverage 720560
Repairs 6250
Painting 3000
Mortgage interest 2,8002,400
Property taxes 2,8002,200
Property depreciation 2,1001,500
Travel costs to the properties 125100
Complete Schedule E below by putting the proper amounts in the indicated cells. If the value of a cell is zero, you must enter a zero ("0") to receive credit for your answer. Use dollar amounts only (i.e., no cents).
Schedule E - Supplemental Income and Loss
Income: Properties Totals
A B C
3 Rents received 3030
4 Royalties received 4040
Expenses:
5 Advertising 50
6 Auto and travel 60
7 Cleaning and maintenance 70
9 Insurance 90
12 Mortgage interest 120120
14 Repairs 140
16 Taxes 160
17 Utilities 170
18 Depreciation expense 180
19 Other 190
20 Total Expenses Add lines 5-1920000200
26 Income or (loss)260

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