Comprehansive problem 7

With emphasis on schedule E

Chris and Stefani Wantanabe live with their two boys at 1400 Victoria Ln., Riverside, CA 92501. Chris is an accountant who has his own accounting practice. Stephenie is an elementary school teacher. Their sons, Jason and Jordan, are age 12 and 9, respectivly. The following is additional information regarding the Watanabes.

Social security numbers for the Watanabes:

Chris 412-34-5670

Stefani 412-34-5671

Justin 412-34- 5672

Jordan 412-34-5673

They paid $5,500 to Friendly Hills Child Care center for after school care for both Justin and Jordan, allocated equally.

Stefanis W-2 from the Riverside School District showed the following:

Wages = $56,925.04

Federal W/H = $9,985.90

Social Security W/H = $3, 529.35

Medical Wages =$56, 925.04

Medical Wages =$ 825. 41

California W/H =$2,105.75

Chriss accounting business is located in downtown Riverside. His business had the following income and expense information for the year:

Gross Revenue

$165,000

Expenses:

Advertising

$2,100

Insurance

$1,200

Legal Fee

$10,500

Office Supplies

$800

Rent

$24,000

Travel

$6,945

Meals and entertainment

$2,400

Utilities

$2,800

Wages

34,000

Dues

650

Additionally, Chris and Stephanie paid the following expense during the year:

Medical and dental expenses 4500

Property tax(Home on Victoria Ln.) 3750

State income tax 3900

Donations to library 3500

Tax return preperation 800

Mortgage Interest (income) 14,900

Chris and Stefanie also earned $975 0f the interest income from California bank during the year.

Lastly, Chris and Stefani own a three-bedroom cabin in Big Bear Lake (they bought it in 2003). The address is 3105 Stonehedge Road, Big Bear Lake, CA 92315. They did not use the property for personal use at any time during the year. The revenue and expenses for the Big Bear Lake rental property are as follows:

Rental income 18,000

Expenses:

Insurance 1200

Property Tax 2500

Auto(standard mileage) 265

Management fees 1600

Repairs and maintaining 1100

Mortgage interest 9,000

Depreciation 960

Utilities 450

The Watanabes also made $20,000 and $9,000 in federal and California estimated income taxe payments, respectively, during the year.

Required:

Prepare the Watanabes federal tax return for 2014. Use form 140, Schedule A, C, E, SE, and any additional scheduals and forms they may need. They want to contribute to the presidential election campaign, and do not want anyone to be a third- party designee. For any missing information, make reasonable assumptions.