Facts William Spicer (123-45-5789) and June Spicer (937-65-4321) have two dependent children, Sophie (236-52-6587) age 9 and Carl (236-52-6588) age 7, both of whom live at home. William operates a gourmet market in Raleigh, NC Bill's Market, as an accrual-basis sole proprietorship. The information on gross sales, expenses, and property transactions is shown below. William receives no salary and therefore, there is no related FICA tax for him. The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2014; it had an adjusted basis of $3,000 when sold on August 15, 2018. The Market also sold a display case for $1,000 on December 12, 2018, that had cost $12,000 when purchased on June 6, 2012; it had an adjusted basis of $4,000 when sold. The gains or losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements. William is also a 10 percent shareholder in Imagineers Corporation, an S corporation, but takes no active role in the business. He received a Schedule K-1 from this S corporation reporting $18,000 in ordinary business income. June is a general partner in The Bridal Shop Partnership. She worked 3 days a week at the shop and received a Schedule K-1 reporting a $12,000 guaranteed payment and $8,000 in ordinary business income. June paid $3,800 for after-school and summer child care while she worked. 2018 financial results for Bill's Market is as follows: Gross sales ($1,300,000 from credit card sales) 3,700,000 Merchandise purchases 2,480,000 Expenses: Advertising 40,000 Charitable contributions 20,000 Cleaning/maintenance 12,000 Depreciation (MACRS pre-2018 purchases) 3,000 Section 179 expense (2/1/18 display case) 5,000 Payroll taxes 18,000 Health insurance 15,000- Insurance (excludes health) 18,000 Interest expense 1,000 Licenses/fees 4,000 Meals/entertainment 10,000 Office expenses 14,000 Rent 120,000 Salary/wages 210,000 Travel 8,000 Utilities 32,000 Includes $3,000 for health insurance for William and his family. The following information pertains to the completion of the Spicers' personal tax return Interest income $ 500 Dividend income (all qualified) 1,300 Unreimbursed doctor's bills 8,000 Unreimbursed hospital bills 9,000 Dental bills 2,000 Mortgage interest 14,000 Real estate taxes 3,000 Contributions to their church 1,500 The Spicers sold 10,000 shares of ABC stock on February 2, 2018 for $4,000. They had purchased the stock on August 1, 2009 for $18,000. During 2018, the Spicers paid $300 with their 2017 North Carolina state income tax return and made $4,600 in estimated payments for 2018 to NC. This amount exceeds their alternate state sales tax deduction. June is a volunteer at the children's school two days a week tutoring at-risk students. Her total mileage for her trips to and from the school was 1,200 miles. She also had unreimbursed out-of-pocket expenses for teaching materials of $232. Additionally, the Spicers contribute $3,000 each to regular IRAs. The Spicers made Federal quarterly estimated tax payments of $17,500 each quarter. All payments were made when due. Any refund that the Spicers have for 2018 is to be applied to their 2019 estimated taxes. Form 1040 (2018) Page 2 1 2a 3a 2b 3b Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 4a 4b 5a 5b 6 . . ]. 11 Standard Deduction for 8 Single or married filing separately, $12,000 10 Married filing jointly or Qualifying 11 widow(er), $24,000 Head of household, $18,000 If you checked any box under Standard deduction, see instructions. 12 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . Tax-exempt interest. . . b Taxable interest . . Qualified dividends. . . b Ordinary dividends IRAS, pensions, and annuities. b Taxable amount Social security benefits. . 5a b Taxable amount. . . Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 . . . . Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 . . . . . . . . . . . . . . . . . Standard deduction or itemized deductions (from Schedule A). . . . Qualified business income deduction (see instructions) . . . . . . . Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -o- . . . a Tax (see inst.) (check if any from: 1 Form(s) 8814 2 Form 4972 3 D b Add any amount from Schedule 2 and check here . . . . . . . . . . . . a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here Subtract line 12 from line 11. If zero or less, enter -o- . . Other taxes. Attach Schedule 4. . . . . . . . . . . . . . . . Total tax. Add lines 13 and 14 . . . . . . . . . . . . Federal income tax withheld from Forms W-2 and 1099 . . Refundable credits: a EIC (see inst.) _b Sch. 8812 Form 8863 Add any amount from Schedule 5 . . . . . . . . . . . . . . Add lines 16 and 17. These are your total payments . . . . . . . . If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid. . . . Amount of line 19 you want refunded to you. If Form 8888 is attached, check here . . . Routing number c Type: Checking Savings Account number Amount of line 19 you want applied to your 2019 estimated tax . . Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions. Estimated tax penalty (see instructions). . . . . . . . 23 13 14 15 16 17 18. 19 20a Refund 19 20a Direct deposit? b See instructions. 21 Amount You Owe 22 23 21 22 Facts William Spicer (123-45-5789) and June Spicer (937-65-4321) have two dependent children, Sophie (236-52-6587) age 9 and Carl (236-52-6588) age 7, both of whom live at home. William operates a gourmet market in Raleigh, NC Bill's Market, as an accrual-basis sole proprietorship. The information on gross sales, expenses, and property transactions is shown below. William receives no salary and therefore, there is no related FICA tax for him. The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2014; it had an adjusted basis of $3,000 when sold on August 15, 2018. The Market also sold a display case for $1,000 on December 12, 2018, that had cost $12,000 when purchased on June 6, 2012; it had an adjusted basis of $4,000 when sold. The gains or losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements. William is also a 10 percent shareholder in Imagineers Corporation, an S corporation, but takes no active role in the business. He received a Schedule K-1 from this S corporation reporting $18,000 in ordinary business income. June is a general partner in The Bridal Shop Partnership. She worked 3 days a week at the shop and received a Schedule K-1 reporting a $12,000 guaranteed payment and $8,000 in ordinary business income. June paid $3,800 for after-school and summer child care while she worked. 2018 financial results for Bill's Market is as follows: Gross sales ($1,300,000 from credit card sales) 3,700,000 Merchandise purchases 2,480,000 Expenses: Advertising 40,000 Charitable contributions 20,000 Cleaning/maintenance 12,000 Depreciation (MACRS pre-2018 purchases) 3,000 Section 179 expense (2/1/18 display case) 5,000 Payroll taxes 18,000 Health insurance 15,000- Insurance (excludes health) 18,000 Interest expense 1,000 Licenses/fees 4,000 Meals/entertainment 10,000 Office expenses 14,000 Rent 120,000 Salary/wages 210,000 Travel 8,000 Utilities 32,000 Includes $3,000 for health insurance for William and his family. The following information pertains to the completion of the Spicers' personal tax return Interest income $ 500 Dividend income (all qualified) 1,300 Unreimbursed doctor's bills 8,000 Unreimbursed hospital bills 9,000 Dental bills 2,000 Mortgage interest 14,000 Real estate taxes 3,000 Contributions to their church 1,500 The Spicers sold 10,000 shares of ABC stock on February 2, 2018 for $4,000. They had purchased the stock on August 1, 2009 for $18,000. During 2018, the Spicers paid $300 with their 2017 North Carolina state income tax return and made $4,600 in estimated payments for 2018 to NC. This amount exceeds their alternate state sales tax deduction. June is a volunteer at the children's school two days a week tutoring at-risk students. Her total mileage for her trips to and from the school was 1,200 miles. She also had unreimbursed out-of-pocket expenses for teaching materials of $232. Additionally, the Spicers contribute $3,000 each to regular IRAs. The Spicers made Federal quarterly estimated tax payments of $17,500 each quarter. All payments were made when due. Any refund that the Spicers have for 2018 is to be applied to their 2019 estimated taxes. Form 1040 (2018) Page 2 1 2a 3a 2b 3b Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 4a 4b 5a 5b 6 . . ]. 11 Standard Deduction for 8 Single or married filing separately, $12,000 10 Married filing jointly or Qualifying 11 widow(er), $24,000 Head of household, $18,000 If you checked any box under Standard deduction, see instructions. 12 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . Tax-exempt interest. . . b Taxable interest . . Qualified dividends. . . b Ordinary dividends IRAS, pensions, and annuities. b Taxable amount Social security benefits. . 5a b Taxable amount. . . Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 . . . . Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 . . . . . . . . . . . . . . . . . Standard deduction or itemized deductions (from Schedule A). . . . Qualified business income deduction (see instructions) . . . . . . . Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -o- . . . a Tax (see inst.) (check if any from: 1 Form(s) 8814 2 Form 4972 3 D b Add any amount from Schedule 2 and check here . . . . . . . . . . . . a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here Subtract line 12 from line 11. If zero or less, enter -o- . . Other taxes. Attach Schedule 4. . . . . . . . . . . . . . . . Total tax. Add lines 13 and 14 . . . . . . . . . . . . Federal income tax withheld from Forms W-2 and 1099 . . Refundable credits: a EIC (see inst.) _b Sch. 8812 Form 8863 Add any amount from Schedule 5 . . . . . . . . . . . . . . Add lines 16 and 17. These are your total payments . . . . . . . . If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid. . . . Amount of line 19 you want refunded to you. If Form 8888 is attached, check here . . . Routing number c Type: Checking Savings Account number Amount of line 19 you want applied to your 2019 estimated tax . . Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions. Estimated tax penalty (see instructions). . . . . . . . 23 13 14 15 16 17 18. 19 20a Refund 19 20a Direct deposit? b See instructions. 21 Amount You Owe 22 23 21 22