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. Russell Long had the following income and expenses from the landscaping business:

Income	$133,550
Expenses:
Business insurance	3,915
Office supplies	2,575
Payroll	83,643
Payroll taxes	8,105
Political contributions to Senate campaign	500
Meals and entertainment (total)	2,300
Contract labor	7,310
Maintenance	8,316
Equipment rent	10,900
Telephone	2,215
Business gifts (no gift over $22)	790
Special clothing and safety shoes	660
Subscription to Green Lawns magazine	120
Educational seminar on bug control	375
Other expenses	1,780

Russell attended 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 22 miles each way to Boise to take exams four times for a total of 176 miles.

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 180 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

$42,600

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 $4,500 on April 18, 2016.

Click here to access the tax table to use for this problem.

Required: Complete the Longs' federal tax return for 2016. Use Form 1040, Schedule B, Schedule C, and Form 8829. 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.