Comprehensive Problem 3-2A

Russell (birthdate February 2, 1966) and Linda (birthdate August 30, 1971) Long have brought you the following information regarding their income and expenses for the current year. Russell owns and operates a landscaping business called Lawns and Landscapes Unlimited. The business is operated out of their home, located at 1234 Cherry Lane, Nampa, ID 83687. The principal business code is 561730. Russells bookkeeper provided the following income statement from the landscaping business:

Lawns and Landscapes Income Statement 12/31/2017
	Current Period			Prior Period
	1/1/2017 to 12/31/2017			1/1/2016 to 12/31/2016
REVENUES
Lawn maintenance	$82,345.00			$71,998.00
Lawn and plant installation	34,568.00			48,576.00
Other	17,097.00			8,001.00
TOTAL REVENUES	134,010.00			128,575.00
COST OF SERVICES
Salaries	83,412.00			78,445.00
Payroll Taxes	6,673.00			6,432.00
Equipment Rental	12,600.00			10,651.00
Maintenance (Equipment)	8,316.00			8,435.00
Special Clothing and Safety Shoes	660.00			200.00
Contract Labor	7,780.00			6,790.00
TOTAL COST OF SERVICES	119,441.00			110,953.00
GROSS PROFIT (LOSS)	14,569.00			17,622.00
OPERATING EXPENSES
Advertising and Promotion	1,500.00			700.00
Donations	600.00			500.00
Insurance	4,000.00			870.00
Meals and Entertainment	2,300.00			2,100.00
Subscriptions	120.00			120.00
Business Gifts	790.00			600.00
Telephone	2,015.00			1,956.00
Training	1,975.00
Travel	865.00			750.00
Other	1,780.00			2,724.00
TOTAL OPERATING EXPENSES	15,945.00			10,320.00
NET INCOME (LOSS)	$(1,376.00)			$7,302.00

The bookkeeper provided the following additional information:

Donations expense is a $600 donation to the Campaign to Re-Elect Senator Ami Dahla.

Training includes $575 for an educational seminar on bug control. It also includes the cost for Russell to attend an online certificate program in landscaping in order to improve his skills and advertise his designation as a certified landscaper. The tuition, fees, and books cost $1,400. He also drove his personal car 29 miles each way to Boise to take exams three times for a total of 174 miles.

No business gift exceeded $22 in value.

The business uses the cash method of accounting and has no accounts receivable or inventory held for resale.

In addition to the above expenses, the Longs have set aside one room of their house as a home office. The room is 200 square feet and their house has a total of 1,600 square feet. They pay $12,600 per year rental on their house, and the utilities amount to $3,000 for the year.

The Longs also have the following interest income for the year from corporate bonds:

Interest from Idaho Bank and Trust bond portfolio

$42,810

The Longs have two dependent children, Bill (Social Security number 123-23-7654) and Martha (Social Security number 345-67-8654). Both Bill and Martha are full-time high school students, ages 17 and 18, respectively, so they do not qualify for the child tax credit. Russell's Social Security number is 664-98-5678 and Linda's is 554-98-3946. They made an estimated tax payment to the IRS of $2,500 on December 31, 2017.

Required: Complete the Long's tax return including Form 1040 and the provided schedules and forms.

Do not complete Form 4562 (depreciation). You may ignore any related self-employment taxes. Make realistic assumptions about any missing data.

If required, enter a "loss" as a negative number on the tax form. Do not enter deductions or other amounts as negative numbers.

If an amount box does not require an entry or the answer is zero, enter "0".

Do not round any division. If required, round your final answers to the nearest dollar.

Complete the Long's Form 1040.

Form 1040

Department of the TreasuryInternal Revenue Service (99) U.S. Individual Income Tax Return

2017

OMB No. 1545-0074

IRS Use Only

For the year Jan. 1Dec. 31, 2017, or other tax year beginning

, 2017, ending

, 20

See separate instructions.

Your first name and initial Russell

Last name Long

Your social security number 664-98-5678

If a joint return, spouse's first name and initial Linda

Last name Long

Spouse's social security number 554-98-3946

Home address (number and street). If you have a P.O. box, see instructions. 1234 Cherry Lane

Apt. no.

Make sure the SSN(s) above and on line 6c are correct.

City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Nampa, ID 83687

Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund.

You Spouse

Foreign country name

Foreign province/state/country

Foreign postal code

Filing Status

Exemptions	6a		Yourself. If someone can claim you as a dependent, do notcheck box 6a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				}	Boxes checked on 6a and 6b
	b		Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .					No. of children on 6c who: lived with you
	c	Dependents:		(2)Dependent's social security number	(3)Dependent's relationship to you	(4) If child under age 17 qualifying for child tax credit (see instructions)
	(1) First name		Last name					did not live with you due to divorce or separation (see instructions)
If more than four dependents, see instructions and check here	Bill Long			123-23-7654	Son
	Martha Long			345-67-8654	Daughter			Dependents on 6c not entered above
								Add numbers on lines above
	d	Total number of exemptions claimed . . . . . . . . . . . . . . . . . . . . . . .

Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions.	7	Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .							7
	8a	Taxable interest. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . .							8a
	b	Tax-exempt interest. Do not include on line 8a . . . . . . . . .				8b
	9a	Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . .							9a
	b	Qualified dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .				9b
	10	Taxable refunds, credits, or offsets of state and local income taxes . . . . . . . . . . . .							10
	11	Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							11
	12	Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . . . . . . . . . . . . .							12
	13	Capital gain or (loss). Attach Schedule D if required. If not required, check here							13
	14	Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							14
	15a	IRA distributions . . . . .	15a			b	Taxable amount . . .		15b
	16a	Pensions and annuities . .	16a			b	Taxable amount . . .		16b
	17	Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E							17
	18	Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							18
	19	Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							19
	20a	Social security benefits	20a			b	Taxable amount . . .		20b
	21	Other income. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _							21
	22	Combine the amounts in the far right column for lines 7 through 21. This is your total income							22
Adjusted Gross Income	23	Educator expenses . . . . . . . . . . . . . . . . . . . . . . . . . .				23
	24	Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ . .				24
	25	Health savings account deduction. Attach Form 8889 . . . .				25
	26	Moving expenses. Attach Form 3903 . . . . . . . . . . . . . . . .				26
	27	Deductible part of self-employment tax. Attach Schedule SE				27
	28	Self-employed SEP, SIMPLE, and qualified plans . . . . . . .				28
	29	Self-employed health insurance deduction . . . . . . . . . .				29
	30	Penalty on early withdrawal of savings . . . . . . . . . . . . . .				30
	31a	Alimony paid b Recipient's SSN _______				31a
	32	IRA deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				32
	33	Student loan interest deduction . . . . . . . . . . . . . . . . .				33
	34	Reserved for future use . . . . . . . . . . . . . . .				34
	35	Domestic production activities deduction. Attach Form 8903				35
	36	Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							36
	37	Subtract line 36 from line 22. This is your adjusted gross income . . . . . . . . . . . .							37

For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 11320B

Form 1040 (2017)

Form 1040 (2017)

Russell and Linda Long

664-98-5678

Page 2

38

Amount from line 37 (adjusted gross income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

Tax and Credits

39a

Check if:

{

You were born before January 2, 1953, Blind. Spouse was born before January 2, 1953, Blind.

}

Total boxes checked 39a

b

If your spouse itemizes on a separate return or you were a dual-status alien, check here 39b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Standard Deduction for

People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions.

All others:

Single or Married filing separately, $6,350

Married filing jointly or Qualifying widow(er), $12,700

Head of household, $9,350

40

Itemized deductions (from Schedule A) or your standard deduction (see left margin)

40

41

Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

42

Exemptions. If line 38 is $156,900 or less, multiply $4,050 by the number on line 6d. Otherwise, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42

43

Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0-

43

44

Tax (see instructions). Check if any from: a Form(s) 8814 b Form 4972 c ___

44

45

Alternative minimum tax (see instructions). Attach Form 6251 . . . . . . . . . . . . . . .

45

46

Excess advance premium tax credit repayment. Attach Form 8962 . . . . . . . . . . . . . . .

46

47

Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47

48

Foreign tax credit. Attach Form 1116 if required . . . . . . . .

48

49

Credit for child and dependent care expenses. Attach Form 2441

49

50

Education credits from Form 8863, line 19 . . . . . . . . . .

50

51

Retirement savings contributions credit. Attach Form 8880

51

52

Child tax credit. Attach Schedule 8812, if required . . . . .

52

53

Residential energy credit. Attach Form 5695 . . . . . . . .

53

54

Other credits from Form: a 3800 b 8801 c _______

54

55

Add lines 48 through 54. These are your total credits . . . . . . . . . . . . . . . . . . . . . . . .

55

56

Subtract line 55 from line 47. If line 55 is more than line 47, enter -0- . . . . . . . . . . . .

56

Other Taxes

57

Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57

58

Unreported social security and Medicare tax from Form: a 4137 b 8919 . . . . . . .

58

59

Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required

59

60a

Household employment taxes from Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . . .

60a

b

First-time homebuyer credit repayment. Attach Form 5405 if required . . . . . . . . . . . .

60b

61

Health care: individual responsibility (see instructions)

Full-year coverage

61

62

Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) _ _ _ _ _ _

62

63

Add lines 56 through 62. This is your total tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63

Payments

64

Federal income tax withheld from Forms W-2 and 1099 . . . . . .

64

If you have a qualifying child, attach Schedule EIC.

65

2017 estimated tax payments and amount applied from 2016 return

65

66a

Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . .

66a

b

Nontaxable combat pay election . . . . . .

66b

67

Additional child tax credit. Attach Schedule 8812 . . . . . . . . . . .

67

68

American opportunity credit from Form 8863, line 8 . . . . . . . .

68

69

Net premium tax credit. Attach Form 8962 . . . . . . . . . . . . . . .

69

70

Amount paid with request for extension to file . . . . . . . . . . . .

70

71

Excess social security and tier 1 RRTA tax withheld . . . . . . . .

71

72

Credit for federal tax on fuels. Attach Form 4136 . . . . . . . . . . .

72

73

Credits from Form: a 2439 b Reserved c 8885 d

73

74

Add lines 64, 65, 66a, and 67 through 73. These are your total payments . . . . . . . .

74

Refund

75

If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid

75

76a

Amount of line 75 you want refunded to you. If Form 8888 is attached, check here . .

76a

Direct deposit? See instructions.

b

Routing number

c Type: Checking Savings

d

Account number

77

Amount of line 75 you want applied to your 2018 estimated tax

77

Amount You Owe

78

Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

79

Estimated tax penalty (see instructions) . . . . . . . . . . . . . . . .

79

Third Party Designee

Do you want to allow another person to discuss this return with the IRS (see instructions)? Yes. Complete below. No

Designee's name

Phone no.

Personal identification number (PIN)

Sign Here Joint return? See instructions. Keep a copy for your records.

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and accurately list all amounts and sources of income I received during the tax year. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Your signature Russell Long

Date

Your occupation Landscaper

Daytime phone number

Spouse's signature. If a joint return, bothmust sign. Linda Long

Date

Spouse's occupation Homemaker

If the IRS sent you an Identity Protection PIN, enter it here
(see inst.)

Paid Preparer Use Only

Print/Type preparer's name

Preparer's signature

Date

Check if self-employed

PTIN

Firm's name

Firm's EIN

Firm's address

Phone no.

Go to www.irs.gov/Form1040 for instructions and the latest information.

Form 1040 (2017)

Complete the Longs' Schedule B.

SCHEDULE B (Form 1040A or 1040) Department of the Treasury Internal Revenue Service (99)	Interest and Ordinary Dividends Attach to Form 1040A or 1040. Go to www.irs.gov/ScheduleB for instructions and the latest information.	OMB No. 1545-0074
		2017 Attachment Sequence No. 08

Name(s) shown on return		Russell and Linda Long	Your social security number 664-98-5678
Part I Interest (See instructions and the instructions for Form 1040A, or Form 1040, line 8a.) Note: If you received a Form 1099-INT, Form 1099-OID, or substitute statement from a brokerage firm, list the firm's name as the payer and enter the total interest shown on that form.	1	List name of payer. If any interest is from a seller-financed mortgage and the buyer used the property as a personal residence, see the instructions and list this interest first. Also, show that buyer's social security number and address		Amount
			1
	2	Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
	3	Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
	4	Subtract line 3 from line 2. Enter the result here and on Form 1040A, or Form 1040, line 8a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
	Note: If line 4 is over $1,500, you must complete Part III.			Amount
Part II Ordinary Dividends (See instructions and the instructions for Form 1040A, or Form 1040, line 9a.) Note: If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm's name as the payer and enter the ordinary dividends shown on that form.	5	List name of payer _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
			5
	6	Add the amounts on line 5. Enter the total here and on Form 1040A, or Form 1040, line 9a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
	Note: If line 6 is over $1,500, you must complete Part III.

	You must complete this part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust.		Yes	No
Part III Foreign Accounts and Trusts (See instructions.)	7a	At any time during 2017, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
				X
		If "Yes," are you required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), to report that financial interest or signature authority? See FinCEN Form 114 and its instructions for filing requirements and exceptions to those requirements . . . . . . . . . . .
	b	If you are required to file FinCEN Form 114, enter the name of the foreign country where the financial account is located _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
	8	During 2017, did you receive a distribution from, or were you the grantor of, or transferor to, a foreign trust? If "Yes," you may have to file Form 3520. See instructions . . . . . . . . .
				X

For Paperwork Reduction Act Notice, see your tax return instructions.

Cat. No. 17146N

Schedule B (Form 1040A or 1040) 2017