Attached is the 2016 income information for a married couple, the Voles, who have two children. Im using 2016 because thats the year for which the information is given in the book. The wife is employed outside the home and earns a salary for which she received a W-2 at the end of the year. The husband is a self-employed contractor. His business is a sole proprietorship. He owns a truck that is primarily used in his business, and he has set up an office in their home which is used exclusively in the business. The Voles own a single-family rental house which is rented out for the entire year. That is, they rented it to the same people for the entire year, 366 days. Christy Vole, the wife, actively participates in the management of the rental property. The son is a full-time student age 19. He has a summer job for which he has received a Form W-2, but you don't have to prepare a return for him. Suzie is just 3, so she has no income. The Voles have her in day care to allow them to work. Prepare Form 1040 for the Voles (the adults, not the children). If required, also prepare Schedules A, B, C, D, E, and SE. Don't bother preparing Form 8949 unless you want to. Just putting the capital gains and losses on Schedule D will suffice. Assume, for the short-term transactions, that Box A was checked on Form 8949 for each of the capital transactions. For the longterm transactions, assume that Box D was checked. This instruction will make sense when you look at Schedule D. Dont worry about completing Form 4562, Depreciation. Assume that any depreciation amounts given are correct and are for assets placed in service before 2016. Dont complete Form 8829 relating to the Office In Home deduction. Just figure the deduction, and put it on the appropriate line on Schedule C. You do not have to complete any forms required to take any credits to which the Voles may be entitled. If this were a real return, youd need to complete and file Forms 2441 and 8863. If you want to tackle these forms, be my guest, but you dont have to. I think completing these forms makes this exercise too long and cumbersome. You should be able to calculate the things on these forms, so make the appropriate calculations and put the calculation results on the applicable lines of the forms that you do have to turn in. Basically, youll need to complete Form 1040, Schedules A, B, C, D, E (Page 1 only), and SE. You can download these from the IRS website. Use the 2016 tax tables, exemption amount, and standard deduction amount, if applicable. These are in the appendices at the back of the book. Dont bother computing the tax using the tuition and fees deduction. Taking the education credits is better. Dont prepare a state return for these people. You have sufficient information to compute not only the tax but also how much they owe or the refund they should get back, so do all that. Len and Christy Vole 229 N. First Street East Logan, UT 84321 Age 42 and 39, respectively Johnny (full-time student) Age 19 Susie Age 3 Len Vole Christy Vole Johnny Vole Susie Vole Age 42 39 19 3 SSAN 345-67-8901 543-21-0987 987-65-4321 123-45-6789 W-2 Salary $46,000 $5,000 Interest from First National Bank $5,000 $300 Interest from State of Utah Bond $2,500 Dividends BlivetCo $250 Ferguson Airlines $650 Atlantic Casinos $3,100 La Grande Compagnie de la France $2,000 Portion of Above Dividends that are Qualified $4,000 Gambling Winnings $2,000 $1,000 Gambling Losses $3,000 $6,000 Medical Expenses-Checkups for whole family $400 Mortgage Interest on Home $12,000 RE Taxes on Home $4,000 State Income Taxes Paid with 2015 Return which was filed April, 2016 $700 Withheld from Christy's Salary $2,100 Federal Income Taxes Withheld from Christy's Salary $3,000 Charitable Contributions Cash to Church $1,000 Clothes and old furniture to Goodwill Cost when purchased $700 Value when donated $100 Tax Preparation Fees: $300 For preparing all of 1040 except Schedule C. Fee for Schedule C included in Accounting Expense in business income statement. Day Care cost for Little Susie $3,500 Paid to Little Tots Day Care Center 1940 N. Main St. Logan, UT 84321 Identifying Number: 36-1234567 Costs of Johnny's attendance at college: Tuition before scholarship payment $12,000 Books $650 Fees Required for Enrollment $120 Room and Board $3,500 Season Football Tickets $300 Tuition Paid by Johnny's Scholarship directly to school $8,000 Schedule C Business Total Revenues $75,000 Supplies $20,000 Depreciation on Furniture & Fixtures $1,700 Advertising $2,000 Insurance $6,000 Accounting Services $8,000 Repairs $1,000 Business License $50 Speeding Ticket $75 $36,175 Home Office Expenses: Painting Home Office $1,200 Decorating Home Office $500 Utilities for whole house $1,800 Insurance for whole house $600 Depreciation on whole house $800 Area of Home Office 400 Area of Whole House 2,400 Truck Expenses: Fuel $6,000 Repairs and Maintenance $1,000 Depreciation on Total Truck Cost $4,800 Actual Expenses $11,800 Personal Miles 700 Business Miles 25,300 Total Miles 26,000 Business Miles 25,300 Mileage Rate $0.54 Capital Gain Income: Date Bought Date Sold Purchase Price Selling Price 100 shares BlivetCo 2/13/16 12/21/16 $2,500 $2,300 100 shares Fly By Night Insurance Co. 6/20/2000 12/15/16 $500 $2,000 100 shares Acme Anvils 9/8/16 12/23/16 $1,500 $2,500 100 shares Ferguson Airlines 5/20/13 5/7/16 $4,000 $10,000 $8,500 $16,800 Located at 2121 Blivet Drive, Logan, UT Income and Expenses on Rental House: Rent Revenue $24,000 Maintenance Expense $1,200 Insurance Expense $600 Interest Expense on Mortgage Debt $4,800 Real Estate Taxes $4,000 Depreciation on Rental House $4,300 Repair Expense $600