Extra Credit Return #2

Facts: Blake and Gwen Levine live in Gaithersburg, Maryland. Blake is the Vice President of Sales at a small start-up company. Gwen is a former public relations executive who currently consults for individuals and companies that have major public relations crisis issues. She also serves on the board of directors of a movie development company. They have three children: Adam (age 18), Celo (age 15), and Christina (age 12). In January, Adam left home to attend a liberal arts college. All three children qualify as Blake and Gwens federal income tax dependents. They plan to file a joint tax return. They provided the following information: Blakes social security number is 294-94-8583 Gwens social security number is 191-52-4242 Adams social security number is 381-85-9642 Celos social security number is 704-22-5080 Christinas social security number is 336-88-5658 The Levines mailing address is 85 Mason Dixon Line, Gaithersburg, Maryland 36982. Blake Levine reported the following data related to his employment during the year: Company Gross Wages Federal Income Tax Withholding State Income Tax Withholding DC Lobbying Inc. $115,325 $29,230 $14,400 The above amounts do not reflect any income items described below. Blakes employer withheld all payroll taxes it was required to withhold. Gwen Levine received the following revenue during the year (she uses the cash method of accounting). Consulting revenue reported to her on a Form 1099-MISC, Box 7 Tickle Me Elmo $32,000 Hillary Clinton 2016 Campaign $8,500 Russians for Trump $3,750 ACCT3410 Fall 2017 Extra Credit Return #2 Board of director compensation reported to her on a Form 1099-MISC, Box 7 Weinstein Company $6,500 During the year, Gwen paid the following consulting business expenses: Airfare $2,900 Hotel $1,450 Meals $390 Parking $320 Gwen drove 290 consulting business miles (she has documentation to verify). During the year, Gwen paid the following Board of Director related expenses: Meals $125 Hotel $225 Gwen drove 315 BoD miles (she has documentation to verify). Neither of Gwens business activities s required the filing of Form(s) 1099 to report payments she made during the tax year. In addition, she drove a 2016 Lexus purchased on January 1, 2016 for all of her business mileage. She drove the vehicle a total of 10,605 miles during the year for all purposes. Gwen has written documentation to support the mileage amounts. She also has access to another vehicle for personal purposes. They did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year. They also received the following during the year: Interest income from First Bank of Maryland $320 Interest income from Patterson, Maryland School District $200 Interest income from U.S. Treasury Bond $350 Interest income from General Mills corporate bond $400 Qualified dividend income from General Motors $1,500 Qualified dividend income from Microsoft $750 Qualified dividend income from Cooper Tire $200 Qualified dividend income from Cardinal Health $425 Qualified dividend income from Union Pacific $140 Qualified dividend income from Procter & Gamble $190 Qualified dividend income from PepsiCo $225 Qualified dividend income from Kellogg $200 Qualified dividend income from Abbott Labs $275 Qualified dividend income from 3M $350 Dividend income (not qualified) from China Fund $2,000 They had the following activity in their brokerage account during the year (all transactions were reported on a form 1099-B and brokerage firm provided summary sheet of all 2017 transactions): Sold 2,000 shares of Microsoft 7/1/17 $22,500 Sold 75 shares of Apple 4/15/17 $28,750 Sold 350 shares of Cooper Tire 10/14/17 $14,700 Sold 1,000 shares of Cardinal Health 9/3/17 $35,000 Sold 50 shares of Union Pacific 1/7/17 $2,750 Purchased 100 shares of Procter & Gamble 7/10/17 $7,700 Purchased 75 shares of Apple 4/18/17 $29,000 Purchased 350 shares of Cooper Tire 11/1/17 $14,000 Purchased 350 shares of PepsiCo 5/14/17 $32,000 Purchased 300 shares of Kellogg 10/14/17 $21,000 ACCT3410 Fall 2017 Extra Credit Return #2 Relevant tax basis/holding period information related to sales of securities in the current year: Purchased 2,000 shares of Microsoft on 5/1/17 for $21,000 Purchased 200 shares of Apple on 3/8/15 for $90,000 Purchased 300 shares of Cooper Tire on 1/12/14 for $9,000 Purchased 50 shares of Cooper Tire on 6/28/17 for $2,000 Received 1,000 shares of Cardinal Health from Gwens father as a gift on 10/10/01. The donors basis was $7,000. Fair market value of the stock at the date of the gift was $41,000 Purchased 100 shares of Union Pacific on 9/5/16 for $6,000 They have a $43,000 long-term capital loss carryover from their prior tax year. They received a 2016 Maryland state income tax refund of $400 in May of 2017. They received the refund because they had overpaid their Maryland state individual income tax in 2016. On their 2016 Federal income tax return, they deducted and received tax benefit for all of the state tax income taxes they paid in 2016. Gwen is a 10% owner in a lobbying firm named Gaslight the Public (GP) (EIN 20-1234567). GP is a Subchapter S corporation. The company reported ordinary business income for the year of $150,000. Gwen acquired the stock several years ago. Her basis in the stock before considering her 2017 income allocation was $92,000. Gwen is a passive owner with respect to this entity. Gwen is also a 20% owner in Fake News, Inc. (FN) (EIN 24-9876543). FN is a Subchapter S corporation. The company reported an ordinary business loss for the year of ($80,000). Gwen acquired the stock several years ago. Her basis in the stock before considering her 2017 loss allocation was $45,000. Gwen is a passive owner with respect to this entity. Blake received 5,000 shares of restricted (common) stock from his employer on July 1, 2017. The terms of the restricted stock grant are such that if Blake is still employed on July 1, 2022 the entire 5,000 shares will vest and become his property. Blake, upon the advice of his tax advisor, prepared and filed an IRC Section 83(b) election on July 8, 2017. On July 1, 2017, shares were valued at $5 per share. Blake estimates the value of the shares in five years will be at least $150 per share. Blake notified his employer about the IRC Section 83(b) election in a timely manner. None of the income tax consequences of this restricted stock grant were included in the $115,325 reported as part of Blakes gross wages (see above). In May, Blake was injured in a home accident. The injury prevented Blake from working for about a month. During this time, Blake received $15,000 in disability payments attributable to a disability insurance policy. The disability policy premiums were paid on Blakes behalf as a nontaxable fringe benefit by his employer. They paid the following expenses during the year: Dentist (unreimbursed by insurance) $1,500 Doctors (unreimbursed by insurance) $ 2,425 Prescriptions (unreimbursed by insurance) $ 675 Real property taxes on residence $7,525 Vehicle property tax based upon value $1,250 Mortgage interest on principal residence $12,550 Margin interest paid to broker $600 Contribution to United Way $2,000 Contribution to American Cancer Society $5,000 Contribution to neighborhood drive to oppose development project $500 Contribution to the Temple Mount Synagogue $12,000 Fee paid to Dewey Cheatum & Howe CPAs for tax preparation $450 ACCT3410 Fall 2017 Extra Credit Return #2 They also donated clothing, electronics, furniture and other household goods to the Salvation Army of Gaithersburg, Maryland on April 15, 2017. Estimated thrift value of the goods donated is $275. On September 1, 2017, they paid $200 in foreign taxes attributable to the dividend received from the China Fund. During the year, they paid a portion of Adams tuition to attend The College of Liberal Arts of Maryland (CLA). They also purchased Adams schoolbooks. Adam attended the spring/summer and the fall semesters as a full-time student. In total, they paid $9,000 for tuition and $2,000 for books. Adam used $6,000 from a scholarship he received from CLA to pay the remaining $6,000 of tuition for the year. Adam was not required to perform any services as a condition of accepting the scholarship. Adam was not employed during the year. CLAs address and employer identification number (EIN) is as follows: The College of Liberal Arts of Maryland 65 Ivory Tower Takoma Park, MD 18069 EIN- 52-5698324 They would like to contribute to the Presidential Election Campaign. They would also like to receive a refund (if any) of tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.

Extra Credit #2 Adjusted Gross Income Line 37 $202,125

form 1040 https://www.irs.gov/pub/irs-pdf/f1040.pdf scheduleA https://www.irs.gov/pub/irs-pdf/f1040sa.pdf