Gregory R. and Lulu B. Clifden live with their family at the Rock Glen House Bed & Breakfast, which Gregory operates. The Bed & Breakfast (B&B) is located at 33333 Fume Blanc Way, Temecula, CA 92591. Gregory and Lulu enjoy good health and eyesight. 1. The Clifdens have three sons. Gerald is 17 years old, Gary is 12 years old, and Glenn is 10 years old. All three boys live at home and the Clifdens provide more than 50% of their support. 2. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: Room rental income $138,000 2,100 Vending machine income Advertising expense Depreciation for book and tax purposes Mortgage interest on the B&B Wages of cleaning people Taxes and licenses 4,810 18,100 23,010 17,540 6,420 18,870 6,300 4,289 Supplies consumed Business insurance Laundry expenses Accounting fees 1,850 Office expenses 2,400 6,350 Utilities All of the above amounts relate to the business portion of the Red & Breakfast: the personal portion is accounted for senarately. The Rock Glen All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 3. The Clifdens made estimated federal income tax payments of $2,000 and estimated state income tax payments of $6,000 (all made during 2018). 4. Lulu worked about 1,000 hours as a substitute schoolteacher with the local school district. She also spent $276 out-of-pocket for various supplies for her classroom. Lulu's Form W-2 from the school district is located on a separate tab. 5. Gregory is retired from the U.S. Navy. His annual statement from the Navy, Form 1099-R. 6. Gregory and Lulu paid (and can substantiate) the following amounts during the year: Mastercard interest Dental expenses orthodontics for Gary) California state income tax (for 2017) $1,480 4,600 2,450 Charitable contributions 3,875 7,631 2,830 Deductible interest on home (personal portion) Real estate taxes (personal portion) Life insurance premiums Automobile registration fees (deductible portion) Tax return preparation fee 475 Contributions to Donald Trump's election campaign 1,000 . . . During the year, Gregory and Lulu received the following qualifying dividends and interest: Interest: Bob's Big Bank $375 220 Bank of Ireland City of Temecula Tax Exempt Bonds Vintage Bank 1,490 See 1099-INT Qualified dividends: Southwest Airlines Heinz Foods $250 550 7. Also, Lulu owns Series EE U.S. savings bonds. During the year, the bond redemption value increased by $1,300. Lulu has not elected the accrual method for these bonds. There were no Irish taxes paid on the interest from the Bank of Ireland. All the above stocks, bonds, and bank accounts are community property. 8. Lulu has a stock portfolio. During the year she sold stock, for which she received 1099-B Forms, as follows (basis was provided to the IRS in all cases): Gold Co. See Form Sales price Orange Co. $8,100 3,800 02/11/18 Green Co. $1,450 2,575 10/31/13 Basis 1099-B Date acquired Date acquired Date sold 02/11/18 06/19/18 10/31/13 10/23/18 9. Lulu paid her ex-husband $4,800 alimony in the current year, as required under the 2014 divorce decree. Her ex-husband's name is Hector Leach and his Social Security number is 566-23-5431. 10. Gregory does all the significant work in the Bed & Breakfast and therefore he pays self-employment tax on 100 percent of the earnings from the B&B. 11. During the year, Gregory's uncle Martin died. Martin had a $50,000 life insurance policy that named Gregory as the beneficiary. Gregory received the check for the benefits payable under the policy on November 30 of the current year. Martin also left Gregory a small nonoperating farm with an appraised value of $120,000. 12. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. 13. Lulu was not eligible for health care benefits due to the part-time nature of her job thus health insurance for the Clifden household was purchased by Gregory. The Clifdens are not eligible for an exemption from coverage. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2018. Assume that the self-employed health insurance deduction is $1,540. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Required: Gregory and Lulu have come to you to prepare their 2018 federal income tax return. You are not required to complete the state income tax return. Gregory and Lulu have given you several IRS forms (see 1099-B and 1099-INT) assumptions. Do not file a federal Form 4952. PAYER'S name, street address, city or town, state or i province, country, ZIP or foreign postal code, and phone no. OMB No. 1545- 0119 Gross distribution $ 14,500.00 2a Taxable amount $ 14,500.00 Distributions From Pensions, Annuities, Retirement or Profit- Sharing Plans, IRAs, Insurance Contracts, 2018 etc. United States Navy Retired Benefits Center Cleveland, OH 43267 2b Taxable amount not determined a Form 1099-R Total distribution Copy B PAYER'S TIN RECIPIENT'S TIN 3 Capital gain (included in box 2a) 4 Federal income tax withheld 11-4662891 543-88-9765 $ 1,500.00 RECIPIENT'S name 6 5 Employee contributions/Designated Roth contributions or insurance premiums Net unrealized appreciation in employer's securities Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return. Gregory R. Clifden Street address (including apt. no.) 33333 Fume Blanc Way 8 Other City or town, state or province, country, and ZIP or foreign postal code Temecula, CA 92591 IRA/SEP SIMPLE code(s) $ This information is being furnished to the IRS. 9a Your percentage of total distribution % 9b Total employee Is contributions 12 State tax withheld 13 State/Payer's state no. 10 Amount allocable to IRR within 5 years 11 1st year of desig. Roth contrib. FATCA filing requirement 14 State distribution $ 14,500.00 $ 350.00 CA AI Payer's RTN (optional) OMB No. 1545-0112 PAYER'S name, street address, city or town, state or province, country. ZIP or foreign postal code, and telephone no. 1 2018 Interest Income 1,400.00 Interest Income $ Form 1099-INT Vintage Bank 6792 Main Street Temecula, CA 92591 2 Early withdrawal penalty Copy B For Recipient 3 Interest on U.S. Savings Bonds and Treas. obligations PAYER'S TIN 96-8724390 RECIPIENT'S name RECIPIENT'S TIN 543-88-9756 4 Federal income tax withheld 5 Investment expenses $ Foreign country or U.S. possession Gregory R. Clifden 6 Foreign tax paid Street address (including apt. no.) 33333 Fume Blanc Way City or town, state or province, country, and ZIP IDS Tax-exempt interest or foreign postal code Temecula, CA 92591 10 Market discount 9 Specified private activity bond interest This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. 11 Bond premium FATCA filing 12 Bond premium on Treasury requirement obligations IS 13 Bond premium on tax- exempt bond Account number (see instructions) 14 Tax-exempt and tax credit bond 15 State 16 State CUSIP no. identification no. 17 State tax withheld $ 2018 Schedule K-1 Form 1065) Department of the Treasury Internal Revenue Service Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items 1 Ordinary business 15 Credits income (loss) For calendar year 2018, or tax year beginning 2018 ending i 2 Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Part I Information About the Partnership Net rental real estate income (loss) 1,578 Other net rental income (loss) 3 16 Foreign transactions A Partnership's employer identification number 11-2343212 4 Guaranteed payments B Partnership's name, address, city, state, and ZIP code Wine Acres Partners 581 Coombs Street Napa, CA 94559 5 Interest income 6a Ordinary dividends C IRS Center where partnership filed return Ogden, UT 6b Qualified dividends D Check if this is a publicly traded partnership (PTP) 6c Dividend equivalents Part II Information About the Partner 7 Royalties E Partner's identifying number 543-88-9756 Net short-term capital | 17 Alternative minimum tax gain (AMT) items (loss) F Partner's name, address, city, state, and ZIP code Gregory R. Clifden 33333 Fume Blanc Way Temecula, CA 92591 9a Net long-term capital gain (loss) F Partner's name, address, city, state, and ZIP code Gregory R. Clifden 33333 Fume Blanc Wav Temecula, CA 92591 9a Net long-term capital gain (loss) (900) 9b Collectibles (28%) gain (loss) G General partner or LLC member-manager Limited partner or other LLC member H Domestic partner Foreign partner 18 Tax-exempt income and nondeductible expenses Il What type of entity is this partner? Individual 9c Unrecaptured section 1250 gain | 10 Net section 1231 gain (loss) 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here o 11 Other income (loss) J Partner's share of profit, loss, and capital (see instructions): Beginning Ending Profit 2 % Loss 2% 2 % Capital 2% 2% 29/ 12 Section 179 deduction 19 Distributions 400 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending 4,679 S 4,679 S Nonrecourse Qualified nonrecourse financing Recourse 14 Self-employment earnings (loss) 1,578 SS L Partner's capital account analysis: *See attached statement for additional information. 2 % Profit Loss Capital 12 Section 179 deduction 19 Distributions 2% 2% 400 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending 4,679S 4,679 $ Nonrecourse Qualified nonrecourse financing Recourse | 14 Self-employment earnings (loss) 1,578 S L *See attached statement for additional information. 13,256 Partner's capital account analysis: Beginning capital account......... S Capital contributed during the years Current year increase (decrease)... $ Withdrawals & distributions ........ Ending capital account..... 678 (400) 13,534 GAAP Section 704(b) book Tax basis Other (explain) M Did the partner contribute property with a built-in gain or loss? Yes No If "Yes," attach statement (see instructions) province, country, ZIP or foreign postal code, and telephone no. Morgan Stanley 269 Wall Street New York, NY 10001 PAYER'S TIN RECIPIENT'S TIN 11-4396782 256-43-8819 Form 8949 2018 Broker and Barte Exchang Form 1099-B Transaction la Description of property (Example: 100 sh. XYZ Co.) Gold Company common stock 1b Date acquired Ic Date sold or disposed 03/27/2018 09/18/2018 1d Proceeds le Cost or other basis $ 12,100.00 $ 14,200.00 If Accrued market discount lg Wash sale loss disallowed Copy 3 If checked, basis For Recipier Short-term gain or reported to IRS loss Long-term gain oro This is important ta information and Ordinary being furnished to th IRS. If you as 4 Federal income tax 5 If checked required to file withheld noncovered security return, a negligend penalty or othe sanction may L 6 Reported to IRS: 7 If checked, loss imposed on you if th- Gross proceeds is not allowed income is taxable an based on amount Net proceeds the IRS determine in 1d that it has not bee reported 8 Profit or loss) realized in 2018 9 Unrealized profit or RECIPIENT'S name Lulu B. Clifden loss Street address (including apt. no.) 33333 Fume Blanc Way City or town, state or province, country, and ZIP or foreign postal code Temecula, CA 92591 Account number (see instructions) Gregory R. and Lulu B. Clifden live with their family at the Rock Glen House Bed & Breakfast, which Gregory operates. The Bed & Breakfast (B&B) is located at 33333 Fume Blanc Way, Temecula, CA 92591. Gregory and Lulu enjoy good health and eyesight. 1. The Clifdens have three sons. Gerald is 17 years old, Gary is 12 years old, and Glenn is 10 years old. All three boys live at home and the Clifdens provide more than 50% of their support. 2. The Rock Glen House B&B is operated as a sole proprietorship and had the following income and expenses for the year: Room rental income $138,000 2,100 Vending machine income Advertising expense Depreciation for book and tax purposes Mortgage interest on the B&B Wages of cleaning people Taxes and licenses 4,810 18,100 23,010 17,540 6,420 18,870 6,300 4,289 Supplies consumed Business insurance Laundry expenses Accounting fees 1,850 Office expenses 2,400 6,350 Utilities All of the above amounts relate to the business portion of the Red & Breakfast: the personal portion is accounted for senarately. The Rock Glen All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House B&B uses the cash method of accounting and has no inventory. The employer tax ID number is 95-1234567. 3. The Clifdens made estimated federal income tax payments of $2,000 and estimated state income tax payments of $6,000 (all made during 2018). 4. Lulu worked about 1,000 hours as a substitute schoolteacher with the local school district. She also spent $276 out-of-pocket for various supplies for her classroom. Lulu's Form W-2 from the school district is located on a separate tab. 5. Gregory is retired from the U.S. Navy. His annual statement from the Navy, Form 1099-R. 6. Gregory and Lulu paid (and can substantiate) the following amounts during the year: Mastercard interest Dental expenses orthodontics for Gary) California state income tax (for 2017) $1,480 4,600 2,450 Charitable contributions 3,875 7,631 2,830 Deductible interest on home (personal portion) Real estate taxes (personal portion) Life insurance premiums Automobile registration fees (deductible portion) Tax return preparation fee 475 Contributions to Donald Trump's election campaign 1,000 . . . During the year, Gregory and Lulu received the following qualifying dividends and interest: Interest: Bob's Big Bank $375 220 Bank of Ireland City of Temecula Tax Exempt Bonds Vintage Bank 1,490 See 1099-INT Qualified dividends: Southwest Airlines Heinz Foods $250 550 7. Also, Lulu owns Series EE U.S. savings bonds. During the year, the bond redemption value increased by $1,300. Lulu has not elected the accrual method for these bonds. There were no Irish taxes paid on the interest from the Bank of Ireland. All the above stocks, bonds, and bank accounts are community property. 8. Lulu has a stock portfolio. During the year she sold stock, for which she received 1099-B Forms, as follows (basis was provided to the IRS in all cases): Gold Co. See Form Sales price Orange Co. $8,100 3,800 02/11/18 Green Co. $1,450 2,575 10/31/13 Basis 1099-B Date acquired Date acquired Date sold 02/11/18 06/19/18 10/31/13 10/23/18 9. Lulu paid her ex-husband $4,800 alimony in the current year, as required under the 2014 divorce decree. Her ex-husband's name is Hector Leach and his Social Security number is 566-23-5431. 10. Gregory does all the significant work in the Bed & Breakfast and therefore he pays self-employment tax on 100 percent of the earnings from the B&B. 11. During the year, Gregory's uncle Martin died. Martin had a $50,000 life insurance policy that named Gregory as the beneficiary. Gregory received the check for the benefits payable under the policy on November 30 of the current year. Martin also left Gregory a small nonoperating farm with an appraised value of $120,000. 12. Gregory is a general partner in a partnership that owns a boutique hotel in northern California and leases the property to a hotel management company. Gregory does not materially participate in the partnership activity but the partnership activity does rise to the level of a trade or business. See Schedule K-1 from the partnership. 13. Lulu was not eligible for health care benefits due to the part-time nature of her job thus health insurance for the Clifden household was purchased by Gregory. The Clifdens are not eligible for an exemption from coverage. The Clifdens purchased health insurance through the Covered California program and received the Form 1095-A. They had no other health insurance during 2018. Assume that the self-employed health insurance deduction is $1,540. The Clifdens did not claim an advance premium credit. Click here to access the completed Form 1095-A to use when completing Form 8962. Required: Gregory and Lulu have come to you to prepare their 2018 federal income tax return. You are not required to complete the state income tax return. Gregory and Lulu have given you several IRS forms (see 1099-B and 1099-INT) assumptions. Do not file a federal Form 4952. PAYER'S name, street address, city or town, state or i province, country, ZIP or foreign postal code, and phone no. OMB No. 1545- 0119 Gross distribution $ 14,500.00 2a Taxable amount $ 14,500.00 Distributions From Pensions, Annuities, Retirement or Profit- Sharing Plans, IRAs, Insurance Contracts, 2018 etc. United States Navy Retired Benefits Center Cleveland, OH 43267 2b Taxable amount not determined a Form 1099-R Total distribution Copy B PAYER'S TIN RECIPIENT'S TIN 3 Capital gain (included in box 2a) 4 Federal income tax withheld 11-4662891 543-88-9765 $ 1,500.00 RECIPIENT'S name 6 5 Employee contributions/Designated Roth contributions or insurance premiums Net unrealized appreciation in employer's securities Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return. Gregory R. Clifden Street address (including apt. no.) 33333 Fume Blanc Way 8 Other City or town, state or province, country, and ZIP or foreign postal code Temecula, CA 92591 IRA/SEP SIMPLE code(s) $ This information is being furnished to the IRS. 9a Your percentage of total distribution % 9b Total employee Is contributions 12 State tax withheld 13 State/Payer's state no. 10 Amount allocable to IRR within 5 years 11 1st year of desig. Roth contrib. FATCA filing requirement 14 State distribution $ 14,500.00 $ 350.00 CA AI Payer's RTN (optional) OMB No. 1545-0112 PAYER'S name, street address, city or town, state or province, country. ZIP or foreign postal code, and telephone no. 1 2018 Interest Income 1,400.00 Interest Income $ Form 1099-INT Vintage Bank 6792 Main Street Temecula, CA 92591 2 Early withdrawal penalty Copy B For Recipient 3 Interest on U.S. Savings Bonds and Treas. obligations PAYER'S TIN 96-8724390 RECIPIENT'S name RECIPIENT'S TIN 543-88-9756 4 Federal income tax withheld 5 Investment expenses $ Foreign country or U.S. possession Gregory R. Clifden 6 Foreign tax paid Street address (including apt. no.) 33333 Fume Blanc Way City or town, state or province, country, and ZIP IDS Tax-exempt interest or foreign postal code Temecula, CA 92591 10 Market discount 9 Specified private activity bond interest This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. 11 Bond premium FATCA filing 12 Bond premium on Treasury requirement obligations IS 13 Bond premium on tax- exempt bond Account number (see instructions) 14 Tax-exempt and tax credit bond 15 State 16 State CUSIP no. identification no. 17 State tax withheld $ 2018 Schedule K-1 Form 1065) Department of the Treasury Internal Revenue Service Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items 1 Ordinary business 15 Credits income (loss) For calendar year 2018, or tax year beginning 2018 ending i 2 Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Part I Information About the Partnership Net rental real estate income (loss) 1,578 Other net rental income (loss) 3 16 Foreign transactions A Partnership's employer identification number 11-2343212 4 Guaranteed payments B Partnership's name, address, city, state, and ZIP code Wine Acres Partners 581 Coombs Street Napa, CA 94559 5 Interest income 6a Ordinary dividends C IRS Center where partnership filed return Ogden, UT 6b Qualified dividends D Check if this is a publicly traded partnership (PTP) 6c Dividend equivalents Part II Information About the Partner 7 Royalties E Partner's identifying number 543-88-9756 Net short-term capital | 17 Alternative minimum tax gain (AMT) items (loss) F Partner's name, address, city, state, and ZIP code Gregory R. Clifden 33333 Fume Blanc Way Temecula, CA 92591 9a Net long-term capital gain (loss) F Partner's name, address, city, state, and ZIP code Gregory R. Clifden 33333 Fume Blanc Wav Temecula, CA 92591 9a Net long-term capital gain (loss) (900) 9b Collectibles (28%) gain (loss) G General partner or LLC member-manager Limited partner or other LLC member H Domestic partner Foreign partner 18 Tax-exempt income and nondeductible expenses Il What type of entity is this partner? Individual 9c Unrecaptured section 1250 gain | 10 Net section 1231 gain (loss) 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here o 11 Other income (loss) J Partner's share of profit, loss, and capital (see instructions): Beginning Ending Profit 2 % Loss 2% 2 % Capital 2% 2% 29/ 12 Section 179 deduction 19 Distributions 400 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending 4,679 S 4,679 S Nonrecourse Qualified nonrecourse financing Recourse 14 Self-employment earnings (loss) 1,578 SS L Partner's capital account analysis: *See attached statement for additional information. 2 % Profit Loss Capital 12 Section 179 deduction 19 Distributions 2% 2% 400 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending 4,679S 4,679 $ Nonrecourse Qualified nonrecourse financing Recourse | 14 Self-employment earnings (loss) 1,578 S L *See attached statement for additional information. 13,256 Partner's capital account analysis: Beginning capital account......... S Capital contributed during the years Current year increase (decrease)... $ Withdrawals & distributions ........ Ending capital account..... 678 (400) 13,534 GAAP Section 704(b) book Tax basis Other (explain) M Did the partner contribute property with a built-in gain or loss? Yes No If "Yes," attach statement (see instructions) province, country, ZIP or foreign postal code, and telephone no. Morgan Stanley 269 Wall Street New York, NY 10001 PAYER'S TIN RECIPIENT'S TIN 11-4396782 256-43-8819 Form 8949 2018 Broker and Barte Exchang Form 1099-B Transaction la Description of property (Example: 100 sh. XYZ Co.) Gold Company common stock 1b Date acquired Ic Date sold or disposed 03/27/2018 09/18/2018 1d Proceeds le Cost or other basis $ 12,100.00 $ 14,200.00 If Accrued market discount lg Wash sale loss disallowed Copy 3 If checked, basis For Recipier Short-term gain or reported to IRS loss Long-term gain oro This is important ta information and Ordinary being furnished to th IRS. If you as 4 Federal income tax 5 If checked required to file withheld noncovered security return, a negligend penalty or othe sanction may L 6 Reported to IRS: 7 If checked, loss imposed on you if th- Gross proceeds is not allowed income is taxable an based on amount Net proceeds the IRS determine in 1d that it has not bee reported 8 Profit or loss) realized in 2018 9 Unrealized profit or RECIPIENT'S name Lulu B. Clifden loss Street address (including apt. no.) 33333 Fume Blanc Way City or town, state or province, country, and ZIP or foreign postal code Temecula, CA 92591 Account number (see instructions)