Instruction:

Complete the 2017 federal income tax return for Joseph and Diana Cohen. In preparing the return, you will need to use schedule A, B, C, D, E and SE form 1040, 2441, 4562, 8582, 8863, 8949 and other forms if necessary. Since 1040 and other necessary forms for 2017 are not available at this moment, you may use forms for 2016 but use the 2017 numbers (standard deduction, personal exemption, etc.) for calculations. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.

Family Information:

Husband	Joseph Cohen	SSN 598-94-2583	Birthday: 8/21/1950
Wife	Diana Cohen	SSN 301-52-2942	Birthday: 4/15/1959
Home address	85 North Maple Drive, Long Beach, CA 90231
Son	Alan Cohen	SSN 614-42-5871	Birthday: 2/08/1998
Daughter	Mary Cohen	SSN 658-98-7480	Birthday: 2/08/2011
Mother-in-law	Ella Vader	SSN 289-35-4984	Birthday: 2/08/1937

Facts:

Diana Cohen earned gross wages of $95,000 from Apple Corp. Her 2017 Form W-2 shows that $9,500 has been withheld from her paycheck for payment of federal income taxes.

Joseph Cohen also received Social Security benefits of $28,000 in 2017.

Joseph Cohen owns a used bookstore in Long Beach called Story Books. It is a sole proprietorship located at 155 Main Street, Long Beach, CA 90532. Its income and associated expenses for the year ending December 31, 2017, are the following:

Gross Income	$ 305,000
Less: Cost of Goods Sold	(122,000)
Gross Profit	183,000
Automobile Expense	(4,123)
Depreciation Expense	(12,860)
Office Expense	(5,860)
Supplies Expense	(9,672)
Payroll Tax Expense	(14,566)
Meals and Entertainment Expense	(4,000)
Utilities Expense	(4,112)
Salaries and Wages Expense	(98,000)
Telephone Expense	(3,198)
Total Expense	(156,391)
Net Income/(Loss)	$ 26,609

On January 1, 2017, Story Books Puchased a new delivery van for $38,000. The vans weight does not exceed 6,000 pounds. On January 1, 2016, it purchased bookcases (10-year property) for $16,000, and sofas (5-year property) for $9,000. In 2016, bonus depreciation of $8,000 and $4,500 were taken on the bookcases and furniture, respectively. It elected to use straight-line depreciation, which results in $800 and $900 depreciation expenses for the bookcases and furniture, respectively, in 2017.

Interest income consists of the following:

Citibank	$992	US Bank	$65
Wells Forgo	183

Dividend income consists of the following:

CFD Etrade	$10100	Lucky	$4000
(Qualified, $8,500)		(Qualified, $850)

Diana Cohen is previously divorced form Lef Doel (SSN 453-87-5402), and she had one child with him. In 2017, she made alimony payments totaling $16,000 to him along with child support payments of $8,000. She does not claim this child as a dependent.

The Cohens own a house at 543 Light Avenue, Long Beach, CA, 91242. They purchased this house on January 1, 2010, for $250,000. 75% of the purchase price was related to the building, and the remaining 25% was related to the land. Starting from January 1, 2013, they have converted it to a rental property and rented it to Sam Donald (so that Sam Donald could open his antique store). In 2017, its rental report showed the following:

Rental Income	$ 20,000
Interest expense (mortgage)	(6,215)
Repair expense	(734)
Property tax expense	(1,882)
Utilities Expense	(793)
Depreciation Expense	(6,534)
Total Expense	(16,158)
Net Income/(Loss)	$ 3,842

The Cohens also had invested in several flow-through entities (they have not actively participated in the activities). In 2017, the results from these flow-through entities were as follows:

Socal Brewers (Partnership)

$7000

Rolling Sushi (S-corp)

($6200)

In 2016, Joseph Cohen purchased an annuity from MyLife for $99,000. Monthly payments of $1,100 on the annuity started on July 1, 2017, and will continue for a total of 15 years.

On October 1, 2012, the Cohens bought land for $25,000 and built a new house as their primary personal residence for $100,000. They paid cash. It is located at 873 Red Horse Ridge, Long Beach, CA 92842. They sold it on June 30, 2017 for $500,000, and incurred selling costs of $3,000 and commissions of $26,000.

Joseph Cohen made the following stock sales:

Shares/Stock name	Purchase Date	Sale Date	Sales Price	Purchase Price
150 shares of Ford Co.	3/25/2017	7/05/2017	$4000	1000
300 shares of HP Co.	5/12/2014	9/25/2017	$8000	4000
100 shares of Starbucks	8/30/2011	10/13/2017	$5000	4000
500 shares of Walmart	6/11/2017	11/30/2017	$3000	5000

The Cohens purchased a vacation condominium at 671 Snowwhite, Aspen, Colorado 82433, on April 1, 2017 for $550,000, borrowing $200,000 with a mortgage. They used it personally except for from June 1, 2017 to October 31, 2017, when they rented it out. They reported the following:

Rental Income	$ 46,000
Interest expense (mortgage)	(9,856)
Repair expense	(698)
Property tax expense	(5,222)
Utilities Expense	(690)
Homeowners Association dues	(3,600)
Depreciation Expense	(10,835)
Total Expense	(30,901)
Net Income/(Loss)	$ 15,099

Note that the expenses are already prorated.

In 2017, Diana Cohen made an IRA contribution of $6,000

Medical expenses for the family in 2017 were as follows:

Doctor	$11180	X-rays	$550
Dentists	780	Glasses/Contact lenses	680

Taxes paid in 2017 (in addition to any other taxes discussed previously) were as follows:

State income taxes	1780	Property taxes	$4634
Automobile license fees (based on its value)	$1922

Mortgage interest paid in 2017 (in addition to any other mortgage interest discussed previously was $7,651 on their personal residence. Assume total outstanding principal on all mortgages does not exceed 1,000,000.

Charitable contributions made in 2017 were as follows:

Unicef

$4800

Red Cross

$1800

The Cohens incurred child care expenses for Mary Cohen of $14,000 in 2017. These expenses were paid to Sherry Ding (SSN: 482-93-0923), who lives at 4532, main Street, Long Beach, CA 90223.

Alan Cohen is a full-time college student. From January 15, 2017 through June 15, 2017, he was studying Boston University in the US, He earned no income while he was studying. The Cohens paid his tuition of $35,000 for 2017.

The Cohens made an estimated tax payment in the amount of 15,000 for the year. This amount reflects all four quarters estimated tax payment.