Brian and Corrine Lee are married taxpayers filing jointly They live in the home they own, located at 3301 Pacific Coast Hwy , Laguna Beach, CA 92651 Brian is an optometrist who owns his business Corrine is a social worker for Orange County They have two sons, Brady and Hank During their trip to China last year, they fell in love with a beautiful 1 year old girl from an orphanage near Shanghai and are in the process of adopting her The social security numbers of the four current members of their household are 412 34 5670 for Brian, 412 34 5671 for Corrine, 412 34 5672 for Brady, and 412 34 5673 for Hank Their birth dates are as follows Brian, 5 20 1975 Corrine, 7 23 1975 Brady, 9 1 2005 and Hank, 9 11 2008 The following are Brians income and expense information from his business and Corrines W 2 from Orange County Lees optometrist office income and expenses for the current year Gross income $ 265,000 Cost of goods sold 88,000 (Beginning inventory $45,000 Purchases $63,000 Ending inventory $20,000) Advertising 5,000 Wages 32,000 Office rent 9,600 Other 2,100 The Lees also made $40,000 in federal estimated tax payments during the year The Form W 2 Corrine received from Orange County contained this information Wages (box 1) $ 76,925 04 Federal W H (box 2) $ 13,085 90 Social security wages (box 3) $ 76,925 04 Social security W H (box 4) $ 4,769 35 Medicare wages (box 5) $ 76,925 04 Medicare W H (box 6) $ 1,115 41 State income taxes (box 17) $ 2,944 89 In addition, the Lees had the following income and expenses during the year Income Interest from CDs at Pacific Coast Bank $ 5,000 Expenses Mortgage interest paid to PC Bank for their home $ 29,500 Property taxes paid on their residence 7,000 Adoption expenses (fees, court costs, and attorneys fees) 8,850 Child care costs at LB Parks and Recreations after school program for Hank 3,500 Brian and Corrine had qualifying health care coverage at all times during the tax year Prepare the Lees federal tax return Use Form 1040, Schedule A, Schedule B, Schedule C, and any additional appropriate schedules or forms they may need for credits Do not complete Form 4562 (with Schedule C) (Assume no AMT although it may apply Form 6251 or the AMT calculation is not required ) For any missing information, make reasonable assumptions Assume that Brian follows cash basis of accounting (List the names of the taxpayers in the order in which they appear in the problem Input all the values as positive numbers Instructions can be found on certain cells within the forms Round your final answers to the nearest whole dollar amount )

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Brian and Corrine Lee are married taxpayers filing jointly. They live in the home they own, located at 3301 Pacific Coast Hwy., Laguna Beach, CA

Brian and Corrine Lee are married taxpayers filing jointly. They live in the home they own, located at 3301 Pacific Coast Hwy., Laguna Beach, CA 92651. Brian is an optometrist who owns his business; Corrine is a social worker for Orange County. They have two sons, Brady and Hank. During their trip to China last year, they fell in love with a beautiful 1-year-old girl from an orphanage near Shanghai and are in the process of adopting her. The social security numbers of the four current members of their household are 412-34-5670 for Brian, 412-34-5671 for Corrine, 412-34-5672 for Brady, and 412-34-5673 for Hank. Their birth dates are as follows: Brian, 5/20/1975; Corrine, 7/23/1975; Brady, 9/1/2005; and Hank, 9/11/2008. The following are Brian’s income and expense information from his business and Corrine’s W-2 from Orange County.

Lee’s optometrist office income and expenses for the current year:


Gross income	$	265,000
Cost of goods sold		88,000
(Beginning inventory $45,000; Purchases $63,000; Ending inventory $20,000)
Advertising		5,000
Wages		32,000
Office rent		9,600
Other		2,100

The Lees also made $40,000 in federal estimated tax payments during the year.

The Form W-2 Corrine received from Orange County contained this information:

Wages (box 1)	=	$	76,925.04
Federal W/H (box 2)	=	$	13,085.90
Social security wages (box 3)	=	$	76,925.04
Social security W/H (box 4)	=	$	4,769.35
Medicare wages (box 5)	=	$	76,925.04
Medicare W/H (box 6)	=	$	1,115.41
State income taxes (box 17)	=	$	2,944.89

In addition, the Lees had the following income and expenses during the year:


Income
Interest from CDs at Pacific Coast Bank	$	5,000
Expenses
Mortgage interest paid to PC Bank for their home	$	29,500
Property taxes paid on their residence		7,000
Adoption expenses (fees, court costs, and attorney’s fees)		8,850
Child care costs at LB Parks and Recreations after-school program for Hank		3,500

Brian and Corrine had qualifying health care coverage at all times during the tax year.

Prepare the Lees’ federal tax return. Use Form 1040, Schedule A, Schedule B, Schedule C, and any additional appropriate schedules or forms they may need for credits. Do not complete Form 4562 (with Schedule C). (Assume no AMT although it may apply; Form 6251 or the AMT calculation is not required.) For any missing information, make reasonable assumptions. Assume that Brian follows cash basis of accounting. (List the names of the taxpayers in the order in which they appear in the problem. Input all the values as positive numbers. Instructions can be found on certain cells within the forms. Round your final answers to the nearest whole dollar amount.).