David and Susan Holman are married and file a joint return. David is 38 years old and Susan is 36. David is a self-employed certified real estate appraiser (C.R.E.) and Susan is employed by Wells Fargo Bank as a trust officer. They have two children: Richard Lawrence, age 7 and Karen Ann, age 4. The Holmans currently live at 5901 W. 75th Street, Los Angeles, California 90034, in a home they purchased and occupied on September 6, 2008. Until August 12, 2008 the Holman family lived at 3085 Windmill Lane in Dallas, Texas, where David was employed by Vestpar Company, a real estate appraisal company and Susan was a bank officer for First National Bank. They sold their home in Dallas and moved to Los Angeles so that Susan could assume her new role as a trust officer and Davidcould become self-employed. B.) David and Susan sold there home in Dallas for $315,000 and incurred the following expenses: Sales commission........ $18,900 Attorneys fees........ $1,800 Title Insurance....... $2,650 Document preparation fee....... $90 Recording fee....... $30 Pest Inspection fee...... $190 Prepayment penalty for early retirement of home mortgage...... $1,500 The Holmans had purchased the Dallas home on August 4, 2000 and never held it for rent or used it for business purposes. The home originally cost $177,500 and they had paid $6,200 for a cedar fence and $7,900 for landscaping. Within seven weeks of receiving a contract of sale on their house, the Holmans paid $8,500 for interior and exterior painting and $600 for steam-cleaning of the carpets. The sale was closed on August 1, 2008 and the Holmans were required to move out of the home by August 15, 2008. C.) In moving from Dallas to Los Angeles, the Holmans incurred the following expenses, none of which were reimbursed: Cost of moving household goods.........$9,250 Meals........$295 Lodging.......$350 House-hunting expenses ($150 for meals included).......$1,000 Temporary living expenses (20 days; including meals costing $400)........$1,700 Not included in any of the above expenses are the costs for driving two auto mobiles from Dallas to Los Angeles. David and Susan each drove a car, taking turns driving with the children. Although neither one of them kept receipts, Susan noted that her auto milage was 1,500 miles. In addition, David noted that the number of miles from their old home to their old workplace was 24 miles and the number of miles from their old home to their new workplace is 1,514 miles. D.) The Holmans purchased their new home for $525,000 by making a $125,000 down payment and financing the remaining balance with a 30-year, 6% conventional mortgage loan from California Federal Savings and Loan. They were required to prepay 2 points ($8,000) in return for the favorable mortgage terms. New furniture and drapes cost an additional $27,500. E.) The Holmans received the following Forms W-2, reporting their salaries for 2008: 1.) David Holman, Social Security No. 452-64-5837 Gross salary........$75,000 Federal income taxes withheld......$9,050 F.I.C.A. Taxes withheld: Social security........$4,650 Medicare........$1,088 2.) Susan Holman, Social security No. 467-32-5452 First National BankWells Fargo BankTotalGross salary$17,500$34,000$51,000Federal Income Taxes Withheld$1,100$4,150$5,250FICA taxes withheld:Social Security$1,085$2,108$3,193Medicare$254$493$747California income taxes withheld29502950 F.) On October 1, 2008 David rented office space at 5510 Wacker Drive, Los Angeles, California 90025. The terms of the one-year lease agreement called for a monthly rent of $800, with the first and last months rent paid in advance. David decided to operate his business in the name of David R. Holman, Certified Real Estate Appraiser, and he elected to use the cash method of accounting for his revenues and expenses. The following items relate to his business for 2008: Gross receipts......$85,000 Expenses: Advertising.......$250 Bank service charges.......$50 Dues and publications......$450 Insurance.......$600 * Interest.....$275 Professional services......$525 Office rent......$3,200 ** Office supplies.......$700 Meal and entertainment......$500 Miscellaneous expenses......$75 *Three months coverage **Includes prepayment of rent for September, 2009 David drove his personal automobile, a 2007 Buick LeSabre, 5,000 miles for business purposes form October 1 through December 31. Rather than keeping receipts, he elected to use automatic mileage method for determining his auto expenses. Davids total auto mileage for the year was 20,000 miles. On October 3, 2008 David purchased the following furniture and equipment for use in his business: Office furniture......$17,000 Copying machine......$5,800 Computers......$6,500 Laser printers......$2,500 Telephone system......$3,100 David elects to expense the maximum amount allowed under the optional expensing rules of Section 179. He also elects to compute the maximum depreciation allowance using the appropriate MACRS percentages. G.) The Holmans received interest income during 2008 from the following: US Treasury bills.......$1,475 First National Bank, Dallas.....$625 Wells Fargo Bank.......$400 Tarrant County municipal bonds....$800 Federal taxation homework help H.) David and Susan received the following dividends during 2008: Ford Motor Company......$300 Eastman Kodak Company.......$575 IBM Corporation.......$125 General motors stock dividend (20 new shares of stock valued at $60 per share, Received March 9, 2008)......$1,200 I.) The Holmans have never maintained foreign bank accounts or created foreign trusts. J.) The Holmans report the following stock transactions for 2008: Sold 100 shares of IBM stock for $120 per share on August 1, 2008. David had inherited 500 shares of IBM stock from his uncle on July 18, 2004 and the stock was valued at $170 per share on the date of his uncles death (the value used for estate tax purposes). Sold 400 shares of General Motors stock for $78 per share on September 20, 2008. Susan had received 1,000 shares of General Motors stock as a wedding present from her grandfather on June 3, 1996. Her grandfather had purchased the stock for $35 per share on May 7, 1993 and the stock was valued at $50 per share on the date of the gift. Susans grandfather paid gift taxes of $10,000 as a result of the gift. Sold 300 shares of Eastman Kodak stock for $40 per share on December 28, 2008, but did not receive the sales proceeds until January 3, 2009. The Holmans had paid $25 per share for the stock on October 21, 2006. K.) Susan has summarized the following cash expenditures for 2008 from cancelled check, mortgage company statements and other documents: Prescription drugs......$982 Medical insurance premiums (paid by Susan)......$2,830 Doctors and hospital bills (net of reimbursements).....$1535 Contact lenses for David......$218 Real Estate taxes paid on: Dallas residence.....$3,400 Los Angeles residence......$5,600 Sales taxes paid on Susans new auto....$1,485 Ad valorem taxes paid on both autos......$350 Interest paid for: Dallas home mortgage.......$5,250 * Los Angeles home mortgage.........$10,200 ** Credit card interest.......$480 Personal car loan.........$1,720 Cash contributions to: United Methodist Church......$5,000 American Heart Fund......$200 United Way Campaign......$1,500 George W. Bush Campaign Fund.......$250 Susans unreimbursed employee expenses.....$470 *** Davids unreimbursed employee expenses......$360 Tax return preparation fee......$375 * Does not include the mortgage prepayment penalty identified in item (B) above. ** Does not include the interest points charged for the new mortgage identified in item (D) above. ***Does not include any costs for meals or entertainment. Susan also noted that she and David had driven their personal automobiles 500 miles to receive medical treatment for themselves and their children. She also has a receipt for 100 shares of General Motors stock that she gave to her alma mater, Southern Methodist University, on November 12, 2008. The stock was valued at $70 per share on the date of the gift and was from the block of General Motors stock Susan had received as a wedding present from her grandfather [see item (J) (2) above for details]. L.) The Holmans paid the following child care expenses during 2008: Kindergarten Day Care School.......$2,800 1177 Valley View Dallas, TX 75210 EIN: 74-0186254 Happy Trails Day Center.......$2,200 3692 Airport Blvd Los Angeles, California 90034 EIN: 78-0593676 Of the $5,000 total child care expenses, $3,000 was for Karen and the remaining $2,000 was for Richard. M.) Social security numbers for the Holman children are provided: Richard L. Holman, SSN 582-60-4732 Karen A. Holman, SSN 582-60-5840 N.) David and Susan made estimated Federal income tax payments of $1,750 each quarter, on 4/15/08, 6/15/08, 9/15/08 and 1/15/09 O.) The Holmans have always directed that $6 go to the Presidential Election Campaign by checking the yes boxes on their Form 1040 Required: