Comprehensive Tax Problem

Joseph and Diane Smith

1580 West Street

Chatham, VA 24531

Joseph and Diane are both 35 and have no dependents. If your clients receive a refund, they want the full amount refunded to them. Diane is currently pregnant and will give birth during the next tax year.

Joseph – SSN: 400-20-0100

Diane – SSN: 200-40-8000

Joseph works as a salesman. During the current year, Joseph earned a total compensation from his job of $125,000. Following are the deductions from his pay.

Federal Withholding $20,000

FICA (Social Security) Withholding $ 7,347

Medicare $ 1,813

Virginia Withholding $ 4,000

Diane is a nurse and earned total compensation of $45,400. Following are the deductions from her pay.

Federal Withholding $ 5,000

FICA (Social Security) Withholding $ 2,815

Medicare $ 658

Virginia Withholding $ 2,000

Joseph and Diane have investments in stocks and have a saving account at a local bank. During the current year, they earned $1,450 in interest from the Bank of Virginia. They received qualified stock dividends of $5,950 from GE stock. They also traded in the stock market during the year and had the following results (just enter net amounts in the proper schedule).

Long Term Capital Gain $ 4,900

Long Term Capital Loss $(3,200)

Short Term Capital Gain $ 0

Short Term Capital Loss $(7,800)

They have no loss carryover from previous years.

Joseph also owns side consulting business which he runs as a sole proprietor. He uses the cash method to account for this activity. He uses a room in his home exclusively for activities related to this business. Joseph has opted to use the simplified method for a deduction for the business use of his home amounting to $1,500.

During the year, Joseph earned and received $12,500 from clients related to this business. His expenses were as follows:

Advertising $175

Supplies $500

Legal Fees $750

Liability Insurance $600

The couple have the following additional expenses for the year:

Health Insurance (after-tax) $ 4,400

Doctor bills $ 470

Real estate taxes $ 2,200

Personal property taxes $ 400

Mortgage Interest $15,600

Charitable contributions – cash $ 9,000

Charitable contributions – Stock

GE stock owed 5 years:

Fair Market Value (FMV) $ 8,000

Adjusted basis $ 2,000

Tax preparation fees $ 750

Note: Ignore any potential qualified business income deduction for the purposes of this project

Module 04 Course Project - Schedule D Module 04 Content Use the information provided below to complete the Schedule D form Remember to complete the taxpayer information at the top of the form. Comprehensive Tax Problem.docx Update your 1040 form for this new information. Complete the taxpayer information section at the top of the form Enter the appropriate information in Part I and Part II Check the appropriate boxes in Part III - the taxpayers have no foreign interests Submit your Schedule D Enter the Gain or Loss from Schedule D to Form 1040 Line 7