Facts and Information

William Walker (age 48) and his wife Susan (age 47) were married in 1996 and live in Blue Bell, PA. They have three children:

• Gregory (age 21) is a full-time student at Penn State University (Tuition was $18,000 in 2015)
• Molly (age 16) is a junior at Wissahickon High School
• David (age 11) is in 6th grade at a Blue Bell elementary school
• William?s salary from his job as a research scientist at Merck $88,500 (Entire year)
• Susan?s salary from her job as assistant vice-president at Wells Fargo Bank $43,000 (10 months)
• Workers Compensation of $4,850 (William had chemicals splash in his eyes at work and was unable to work for a few weeks in June)
• Unemployment Compensation $2,600 (Susan was laid off from Prudential Insurance Company in August of 2014 and did not get hired by Wells Fargo until 03/01/15)
• Interest from savings accounts at Wells Fargo Bank $285
• Interest from US Savings Bonds $1,200 (principal amount of the bonds redeemed was $2,800) and the total proceeds of $4,000 were used to pay a portion of Gregory?s $18,000 tuition at Penn State University
• Interest from Commonwealth of PA Turnpike Authority bonds (state bonds) $1,650
• Interest from City of Philadelphia Stadium bonds (municipal bonds) $2,000 (These are Private Activity Bonds)
• Ordinary (no special tax rate) dividends from various stocks $600
• Sold stock as follows:
• Refund of State income tax $450 (from filing 2014 tax return in April 2015). The Walker?s itemized deductions in 2014 and they did indeed receive a tax benefit by deducting state income taxes on their 2014 Federal income tax return
• Susan?s Jury Duty pay $18 (she served as a juror for 2 days in 2015)
• Gambling winnings $1,600 (Susan hit a slot machine at Parx casino on girls night out)
• Limited partnership income from partnership A of $13,000 (there was a suspended passive activity loss of $5,000 at 01/01/15. William is at-risk $20,000 in this partnership on 01/01/15)
• Limited partnership loss from partnership B in the amount of $5,500 (there was no suspended passive activity loss on 01/01/15. William is at-risk $10,000 in this partnership on 01/01/15)
• William has group-term life insurance at work in the amount of $100,000. The cost per $1,000 is $.85 per month (Note: this amount is NOT included in his salary)
• Susan has group-term life insurance at work in the amount of $45,000. The cost per $1,000 is $.82 per month (Note: this amount is NOT included in her salary)
• William owns a small garage in Lansdale that he began to rent out to an auto mechanic in October of 2015. The lease term is October 1, 2015 to September 30 of 2016. He collected a total $6,000 from the tenant upon lease signing ($2,000 was a security deposit to be returned to the tenant at end of lease, $4,000 represented the first and last month?s rent). He also received $2,000 on November 1, 2015 (November rent) and $2,000 on December 1, 2015 (December?s rent). He had $700 of expenses for this property in 2015.
• Medical expenses for William, Susan, and their children $6,650
• Medical expenses for Harry $4,120
• Medical expenses for Ellen $5,550
• State of PA income tax $5,900
• Whitpain township local earned income tax $1,850
• Real Estate taxes on home in Blue Bell $5,865
• Real Estate taxes on vacation cabin in the Pocono mountains $2,375
• Real Estate taxes on vacant land in Arizona $950 (William watched too many Superman movies as a teenager and he now believes, as does Lex Luther, that California will eventually fall into the Pacific Ocean and the Arizona land will become valuable beachfront property)
• Sales taxes paid were $2,650
• Gasoline taxes paid were $740
• Mortgage interest on Blue Bell Home $8,380 (loan amount is $200,000)
• Mortgage interest on cabin in Poconos $3,365 (loan amount is $82,000)
• Mortgage interest on land in Arizona $450 (loan amount is $11,500)
• Investment interest $365 (this loan was used to purchase the stocks that paid the dividends)
• Charitable contributions $3,350 in cash plus a donation of stock that cost $800 but had a FMV of $1,300. The stock was purchased in 2012.
• Gambling losses $4,000 (William lost big at the Black Jack table at Borgata casino in Atlantic City on boys night out)
• Amount spent for the production of income - financial advisor fees $1,850
• Tax return preparation fees $1,470
• Susan?s unreimbursed employee business expenses $485
• William?s reimbursed employee business expenses $1,500
• Theft Loss ? The Walker?s home was burglarized in June of 2015 and $15,000 (adjusted basis) of Susan?s jewelry was stolen (FMV of jewelry was $25,000). However, due to a technicality with their homeowner?s insurance policy, they only received $5,000 in insurance proceeds.

Other information for 2015

• Amount paid for David?s after-school care at the YMCA (located next to the elementary school) was $3,800 (he finishes school at 2:30PM and Susan works until at least 5:00PM)
• Tuition paid by Susan to Gwynedd Mercy College was $3,700 (Although Susan earned a bachelor?s degree in Humanities in 1992, she began a graduate program in 2015 to help her career. She did not take enough courses to qualify as a half-time student)
• William had $14,800 in Federal Income Tax withheld from his paycheck in 2015
• Susan had $5,700 in Federal income tax withheld from her paycheck in 2015

REQUIRED

Determine the total number of Exemptions (Personal and Dependency) that the Walker?s may claim in 2015 and list each one by name. Explain reasons for not claiming an exemption for anyone mentioned in the information provided.Prepare a 2015 Married Filing Jointly Federal income tax return for William and Susan Walker. Show all calculations for Gross Income, Deductions For Gross Income, Adjusted Gross Income, Itemized or Standard Deduction, Taxable Income and Total Income Tax. Consider Alternative Minimum Tax. Be sure to consider all credits for which the Walker?s may be eligible.

Finally, the tax return should not only show the Walker?s final Federal income tax

liability (after credits) for 2015 year but whether or not they will be receiving a refund from IRS or must send in an additional tax payment on April 15^th.

Facts and Information William Walker (age 48) and his wife Susan (age 47) were married in 1996 and live in Blue Bell, PA. They have three children: Gregory (age 21) is a full-time student at Penn State University (Tuition was $18,000 in 2015) Molly (age 16) is a junior at Wissahickon High School David (age 11) is in 6th grade at a Blue Bell elementary school Susan's father Harry (age 79) lives in an apartment in East Norriton, just a few miles from William and Susan's home in Blue Bell. Harry's only income is a $4,100 pension and $4,000 in Social Security income which he uses to pay his rent (which is $600 per month) and a few other minor expenses. Since he has very little of his income remaining after paying his rent, William and Susan pay for Harry's food, clothing, medical needs, auto insurance, gasoline, and utility bills. They estimate that they spend at least $850 per month on Harry and this clearly represents more than one-half of his support. William's mother Ellen, who died in October of 2015 at the age of 81, lived with the Walker's in their Blue Bell home for the last few years of her life. She had no income of her own and was totally supported by William and Susan for the portion of 2015 that she was alive. Prior to marrying Susan, William was briefly married to Hillary Dawson for just 10 months in 1993 and they have a daughter Rebecca (age 22, born in November 1993) who is a full-time student at the University of North Carolina. She will graduate in May of 2016. Rebecca has always lived exclusively with her mother in Charlotte, North Carolina since her birth. However, William as a responsible father, always paid child support to Hillary until Rebecca turned 18 years of age. Also, ever since Rebecca's was very young, Hillary has agreed to permit William to claim Rebecca as his dependent every other tax year (by signing IRS Form 8332 Release of Claim to Exemption) until she graduates from College. Accordingly, William claimed Rebecca as his dependent in 2008, 2010, 2012, and 2014. Finally, William and Hillary agreed to alternate paying Rebecca's college tuition each year. In 2015, it was William's turn and he paid $12,500 in tuition for Rebecca to attend University of North Carolina. In 2015, William and Susan had the following income: William's salary from his job as a research scientist at Merck $88,500 (Entire year) Susan's salary from her job as assistant vice-president at Wells Fargo Bank $43,000 (10 months) Workers Compensation of $4,850 (William had chemicals splash in his eyes at work and was unable to work for a few weeks in June) Unemployment Compensation $2,600 (Susan was laid off from Prudential Insurance Company in August of 2014 and did not get hired by Wells Fargo until 03/01/15) Interest from savings accounts at Wells Fargo Bank $285 Interest from US Savings Bonds $1,200 (principal amount of the bonds redeemed was $2,800) and the total proceeds of $4,000 were used to pay a portion of Gregory's $18,000 tuition at Penn State University Interest from Commonwealth of PA Turnpike Authority bonds (state bonds) $1,650 Interest from City of Philadelphia Stadium bonds (municipal bonds) $2,000 (These are Private Activity Bonds) Ordinary (no special tax rate) dividends from various stocks $600 Sold stock as follows: (a) 300 shares of ABC Corp sold for $9 per share on July 11, 2015. Stock was a gift from Susan's aunt Martha. Martha purchased stock for $5 per share on March 8, 2015. She gave the stock to Susan on July 1, 2015 when the fair market value was $7 per share. (b) 100 shares of XYZ Corp sold for $12 per share on October 8, 2015. Stock was inherited by William from his uncle Joe who died on November 11, 2013. Joe purchased the stock for $15 per share on March 8, 2011 and the fair market value was $13 per share on date of Joe's death. Refund of State income tax $450 (from filing 2014 tax return in April 2015). The Walker's itemized deductions in 2014 and they did indeed receive a tax benefit by deducting state income taxes on their 2014 Federal income tax return Susan's Jury Duty pay $18 (she served as a juror for 2 days in 2015) Gambling winnings $1,600 (Susan hit a slot machine at Parx casino on girls night out) Limited partnership income from partnership A of $13,000 (there was a suspended passive activity loss of $5,000 at 01/01/15. William is at-risk $20,000 in this partnership on 01/01/15) Limited partnership loss from partnership B in the amount of $5,500 (there was no suspended passive activity loss on 01/01/15. William is at-risk $10,000 in this partnership on 01/01/15) William has group-term life insurance at work in the amount of $100,000. The cost per $1,000 is $.85 per month (Note: this amount is NOT included in his salary) Susan has group-term life insurance at work in the amount of $45,000. The cost per $1,000 is $.82 per month (Note: this amount is NOT included in her salary) William owns a small garage in Lansdale that he began to rent out to an auto mechanic in October of 2015. The lease term is October 1, 2015 to September 30 of 2016. He collected a total $6,000 from the tenant upon lease signing ($2,000 was a security deposit to be returned to the tenant at end of lease, $4,000 represented the first and last month's rent). He also received $2,000 on November 1, 2015 (November rent) and $2,000 on December 1, 2015 (December's rent). He had $700 of expenses for this property in 2015. In 2015, William and Susan paid the following expenses: Medical expenses for William, Susan, and their children $6,650 Medical expenses for Harry $4,120 Medical expenses for Ellen $5,550 State of PA income tax $5,900 Whitpain township local earned income tax $1,850 Real Estate taxes on home in Blue Bell $5,865 Real Estate taxes on vacation cabin in the Pocono mountains $2,375 Real Estate taxes on vacant land in Arizona $950 (William watched too many Superman movies as a teenager and he now believes, as does Lex Luther, that California will eventually fall into the Pacific Ocean and the Arizona land will become valuable beachfront property) Sales taxes paid were $2,650 Gasoline taxes paid were $740 Mortgage interest on Blue Bell Home $8,380 (loan amount is $200,000) Mortgage interest on cabin in Poconos $3,365 (loan amount is $82,000) Mortgage interest on land in Arizona $450 (loan amount is $11,500) Investment interest $365 (this loan was used to purchase the stocks that paid the dividends) Charitable contributions $3,350 in cash plus a donation of stock that cost $800 but had a FMV of $1,300. The stock was purchased in 2012. Gambling losses $4,000 (William lost big at the Black Jack table at Borgata casino in Atlantic City on boys night out) Amount spent for the production of income - financial advisor fees $1,850 Tax return preparation fees $1,470 Susan's unreimbursed employee business expenses $485 William's reimbursed employee business expenses $1,500 Theft Loss - The Walker's home was burglarized in June of 2015 and $15,000 (adjusted basis) of Susan's jewelry was stolen (FMV of jewelry was $25,000). However, due to a technicality with their homeowner's insurance policy, they only received $5,000 in insurance proceeds. Other information for 2015 Amount paid for David's after-school care at the YMCA (located next to the elementary school) was $3,800 (he finishes school at 2:30PM and Susan works until at least 5:00PM) Tuition paid by Susan to Gwynedd Mercy College was $3,700 (Although Susan earned a bachelor's degree in Humanities in 1992, she began a graduate program in 2015 to help her career. She did not take enough courses to qualify as a half-time student) William had $14,800 in Federal Income Tax withheld from his paycheck in 2015 Susan had $5,700 in Federal income tax withheld from her paycheck in 2015 REQUIRED A. Determine the total number of Exemptions (Personal and Dependency) that the Walker's may claim in 2015 and list each one by name. Explain reasons for not claiming an exemption for anyone mentioned in the information provided. B. Prepare a 2015 Married Filing Jointly Federal income tax return for William and Susan Walker. Show all calculations for Gross Income, Deductions For Gross Income, Adjusted Gross Income, Itemized or Standard Deduction, Taxable Income and Total Income Tax. Consider Alternative Minimum Tax. Be sure to consider all credits for which the Walker's may be eligible. Finally, the tax return should not only show the Walker's final Federal income tax liability (after credits) for 2015 year but whether or not they will be receiving a refund from IRS or must send in an additional tax payment on April 15 th