Comprehensive Problem 9-1

Dr. Carol Harris, CPA, is a single taxpayer and she lives at 674 Yankee Street, Durham, NC 27409. Her Social Security number is 793-52-4335 and her birthdate is July 1, 1968. Carol is an Associate Professor of Accounting at a local college. Carol's earnings and withholding from the college for 2016 are:

Earnings $54,600 Federal income tax withheld 7,800 State income tax withheld 2,650 FICA tax of $3,385.20 and Medicare tax of $791.70 were also withheld from Carol's earnings. Carol's other income includes interest of $167 from a savings account at Bank of the Carolinas and $485 of qualified dividends from Microsoft.

Carol received a 2016 Form 1099-G from the state of North Carolina reporting a state income tax refund of $127 from 2015. Carol itemized her deductions in 2015.

During the year, Carol paid the following amounts (all of which can be substantiated):

Home mortgage interest $6,410 Visa card interest 350 Auto insurance 750 Property taxes on personal residence 2,700 Other medical expenses 810 Charitable contributions (in cash) 967 Actual state sales tax 872 Carol had the following stock market transactions, all of which were reported on Form 1099-B, along with the basis of the stock sold:

StockAcquiredSoldPriceBasisHammerhead Inc. 04/05/09 10/15/16 $5,900$3,200Leopard Corp. 02/01/16 08/03/16 $7,000$5,400Sand Corp. 09/12/11 10/15/16 $7,100$8,500In addition to being a professor at the local college, Carol maintains a CPA practice located at 700 Accounting Way, Durham, NC 27409. Income and expenses from this activity are:

Fees from CPA practice (all paid by check) $40,200 Office rent 4,150 Supplies 750 Computer tax service 1,200 Mileage (4,726 miles) 2,552 Client meals and entertainment (total cost) 2,960 Telephone 975 Other Expenses 1,400 Carol drove her car (placed in service on January 1, 2014) 20,000 miles in total, of which 5,000 miles were for commuting. Carol made 2016 estimated tax payments to the U.S. Treasury of $3,000 for each quarter.

Required:

Complete Carol's federal tax return for 2016. Use Form 1040, Schedule A, Schedule C, Schedule D, Form 8949, page 1 of Schedule SE, and the Qualified Dividends and Capital Gains Tax Worksheet to complete this tax return. Make realistic assumptions about any missing data.

If an amount box does not require an entry or the answer is zero, enter "0". If required, round any amount to the nearest dollar. If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.

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