David R. and Susan Holman
Part 2: Comprehensive Tax Return Problems COMPREHENSIVE TAX RETURN PROBLEMI 1. David R. and Susan L. Holman a. David and Susan Holman are married and file a joint return. David is 38 years of age 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 seven, and Karen Ann, age four. The Holmans currently live at 5901 W. 75th Street, Los Angeles, California 90034, in a home they purchased and occupied on September 6, 2017 Until August 12, 2017 the Holman family lived at 3085 Windmill Lane in Dallas, Texas, where David was employed by Vestpar Company, a real estate ap- praisal 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 job as a trust officer and David could become self-employed b. 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 two points (58,000) in return for the favorable mortgage terms. New furni- ture and drapes cost an additional $27.500.- c. The Holmans received the following Forms W-2, reporting their salaries for 2017: 1. David R. Holman, Social Security No. 452-64-5837: Gross salary from Vestpar, Inc. ...... 595,000 Federal income taxes withheld.... FICA. taxes withheld: Social Security ....... 4,650 Medicare 1,088 California income taxes withheld .............. 3,000 2. Susan L. Holman, Social Security No. 467-32-5452: First National Wells Fargo Bank 9,050 Bank Total $17,500 1,100 $34.000 4,150 $51,500 5.250 Gross salary..... Federal income taxes withheld FI.C.A. taxes withheld: Social Security Medicare. 1,085 254 2.108 493 3.193 747 First National Bank Wells Fargo Bank Total California income taxes withheld .. 2.950 2,950 d. On October 1, 2017 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 month's 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 2017: Part 2 and met David drove his personal automobile, a 2014 Feed M .000 miles for busi ne purposes from October through December 31. the then ke e ps clected to use the automatic mileage method for determining this expenses David's total to mileage for the year was 20.000 miles On October 3, 2017 Duvid purchased the following furniture for une in his business Octubre $17.00 Telephone system) David elects to expense the maxim ing rules of $ 179. He also clects to compute the maximum depreciation allowance amount allowed under the optional expens- using the appropriate MACRS percentages The Holmans received interest income during 2017 from the follow US Treasury bus .. ... 51.45 Foto Bank, Dallas.. . Wells Fargo Bank . . ...... .... .. Tarrant County municipal bonds . h. David and Susan received the following dividends during 2017: Ford Motor Company.. Eastman Kodak Company....... ............. IBM Corporation Apple stock dividend 20 new shares of stock valued at $60 per share, received March 9, 2017) .......... 1.200 300 i. The Holmans have never maintained foreign bank accounts or created foreign trusts. J. The Holmans report the following stock transactions for 2017: 1. Sold 100 shares of IBM stock for S120 per share on August 1, 2017. David had inherited 500 shares of IBM stock from his uncle on July 18, 2013, and the stock was valued at $170 per share on the date of his uncle's death. 2. Sold 400 shares of Apple stock for $78 per share on July 20, 2017. Susan had received 1.000 shares of Apple stock as a birthday present from her grand- father on June 3, 2008. Her grandfather had purchased the stock for $35 per share on May 7. 2004, and the stock was valued at $60 per share on the date of the gift. Susan's grandfather paid gift taxes of $10,000 as a result of the gift. Note: The amount of the annual exclusion taken into account in determining the taxable gift was $10,000. 3. Sold 300 shares of Intel stock for $40 per share on December 28, 2017, but did not receive the sales proceeds until January 3, 2018 The Holmans had paid $25 per share for the stock on May 21, 2014 d 12 Appendix Continuous individual Tax Return Pro Three Cohesive Individual tox Return Problems for 2017 1.500 k. Susan has summarized the follwine cash expenditures for 2017 from canceled checks, mortgage company statements, and other documents Prescription medicines and drugs Medical ce prems ad by Susand Docton' and hospital bilsnet of risbursements Contact lenses for David Real estate ces padon Dalas residence ........ Los Angeles residence. Sales taxes paid on Sunan's new auto Ad valor e s paid on both tes... 5.250 Dallas home mortgage 10.2004 Los Angeles home mortgage Credit card interest... - Personal car loan.. 1,720 . Cash contributions to Und Methodist Church 5.200 Salabon Army Barack Obama Campaign Fund Susan's treimbursed employee expenses David's unreimbursed employee expenses... Tax return preparation fee... Det not include the mortgage prepayment penalty defedin Hom love **Does not include the interest points charged for the new mong identited in tem de above Does not include anycosts for m or e 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 Apple stock that she gave to her alma mater, Southern Methodist University, on November 12, 2017. The stock was valued at $70 per share on the date of the gift and was from the block of Apple stock Susan had received as a wedding present from her grandfather (see item (j)(2) above for details). The Holmans paid the following child care expenses during 2017: 1. Kindergarten Daycare School $2,800 1177 Valley View Dallas, Texas 75210 EIN 74-0186254 2. Happy Trails Day Center...... 2,200 3692 Airport Blvd Los Angeles, California 90034 EN: 78-0593676 I Of the 55.000 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 below: Richard L. Holman, Social Security No. 582-60-4732 Karen A. Holman, Social Security No. 582-60-5840 n. David and Susan made estimated Federal income tax payments of $1.750 each quarter, on 4/15/17,6/15/17, 9/15/17, and 1/15/18. 0. The Holmans have always directed that S6 go to the Presidential Election Campaign by checking the "yes" boxes on their Form 1040. Required: Complete the Holmans' Federal income tax return for 2017. If they have a refund due, they would prefer having it credited against their 2018 taxes. Part 2: Comprehensive Tax Return Problems COMPREHENSIVE TAX RETURN PROBLEMI 1. David R. and Susan L. Holman a. David and Susan Holman are married and file a joint return. David is 38 years of age 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 seven, and Karen Ann, age four. The Holmans currently live at 5901 W. 75th Street, Los Angeles, California 90034, in a home they purchased and occupied on September 6, 2017 Until August 12, 2017 the Holman family lived at 3085 Windmill Lane in Dallas, Texas, where David was employed by Vestpar Company, a real estate ap- praisal 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 job as a trust officer and David could become self-employed b. 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 two points (58,000) in return for the favorable mortgage terms. New furni- ture and drapes cost an additional $27.500.- c. The Holmans received the following Forms W-2, reporting their salaries for 2017: 1. David R. Holman, Social Security No. 452-64-5837: Gross salary from Vestpar, Inc. ...... 595,000 Federal income taxes withheld.... FICA. taxes withheld: Social Security ....... 4,650 Medicare 1,088 California income taxes withheld .............. 3,000 2. Susan L. Holman, Social Security No. 467-32-5452: First National Wells Fargo Bank 9,050 Bank Total $17,500 1,100 $34.000 4,150 $51,500 5.250 Gross salary..... Federal income taxes withheld FI.C.A. taxes withheld: Social Security Medicare. 1,085 254 2.108 493 3.193 747 First National Bank Wells Fargo Bank Total California income taxes withheld .. 2.950 2,950 d. On October 1, 2017 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 month's 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 2017: Part 2 and met David drove his personal automobile, a 2014 Feed M .000 miles for busi ne purposes from October through December 31. the then ke e ps clected to use the automatic mileage method for determining this expenses David's total to mileage for the year was 20.000 miles On October 3, 2017 Duvid purchased the following furniture for une in his business Octubre $17.00 Telephone system) David elects to expense the maxim ing rules of $ 179. He also clects to compute the maximum depreciation allowance amount allowed under the optional expens- using the appropriate MACRS percentages The Holmans received interest income during 2017 from the follow US Treasury bus .. ... 51.45 Foto Bank, Dallas.. . Wells Fargo Bank . . ...... .... .. Tarrant County municipal bonds . h. David and Susan received the following dividends during 2017: Ford Motor Company.. Eastman Kodak Company....... ............. IBM Corporation Apple stock dividend 20 new shares of stock valued at $60 per share, received March 9, 2017) .......... 1.200 300 i. The Holmans have never maintained foreign bank accounts or created foreign trusts. J. The Holmans report the following stock transactions for 2017: 1. Sold 100 shares of IBM stock for S120 per share on August 1, 2017. David had inherited 500 shares of IBM stock from his uncle on July 18, 2013, and the stock was valued at $170 per share on the date of his uncle's death. 2. Sold 400 shares of Apple stock for $78 per share on July 20, 2017. Susan had received 1.000 shares of Apple stock as a birthday present from her grand- father on June 3, 2008. Her grandfather had purchased the stock for $35 per share on May 7. 2004, and the stock was valued at $60 per share on the date of the gift. Susan's grandfather paid gift taxes of $10,000 as a result of the gift. Note: The amount of the annual exclusion taken into account in determining the taxable gift was $10,000. 3. Sold 300 shares of Intel stock for $40 per share on December 28, 2017, but did not receive the sales proceeds until January 3, 2018 The Holmans had paid $25 per share for the stock on May 21, 2014 d 12 Appendix Continuous individual Tax Return Pro Three Cohesive Individual tox Return Problems for 2017 1.500 k. Susan has summarized the follwine cash expenditures for 2017 from canceled checks, mortgage company statements, and other documents Prescription medicines and drugs Medical ce prems ad by Susand Docton' and hospital bilsnet of risbursements Contact lenses for David Real estate ces padon Dalas residence ........ Los Angeles residence. Sales taxes paid on Sunan's new auto Ad valor e s paid on both tes... 5.250 Dallas home mortgage 10.2004 Los Angeles home mortgage Credit card interest... - Personal car loan.. 1,720 . Cash contributions to Und Methodist Church 5.200 Salabon Army Barack Obama Campaign Fund Susan's treimbursed employee expenses David's unreimbursed employee expenses... Tax return preparation fee... Det not include the mortgage prepayment penalty defedin Hom love **Does not include the interest points charged for the new mong identited in tem de above Does not include anycosts for m or e 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 Apple stock that she gave to her alma mater, Southern Methodist University, on November 12, 2017. The stock was valued at $70 per share on the date of the gift and was from the block of Apple stock Susan had received as a wedding present from her grandfather (see item (j)(2) above for details). The Holmans paid the following child care expenses during 2017: 1. Kindergarten Daycare School $2,800 1177 Valley View Dallas, Texas 75210 EIN 74-0186254 2. Happy Trails Day Center...... 2,200 3692 Airport Blvd Los Angeles, California 90034 EN: 78-0593676 I Of the 55.000 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 below: Richard L. Holman, Social Security No. 582-60-4732 Karen A. Holman, Social Security No. 582-60-5840 n. David and Susan made estimated Federal income tax payments of $1.750 each quarter, on 4/15/17,6/15/17, 9/15/17, and 1/15/18. 0. The Holmans have always directed that S6 go to the Presidential Election Campaign by checking the "yes" boxes on their Form 1040. Required: Complete the Holmans' Federal income tax return for 2017. If they have a refund due, they would prefer having it credited against their 2018 taxes
