James A. Jones and his wife, Jean B. are Oklahoma residents for the 2016 tax year. Jean, who was legally blind, passed away on June 5, 2016. Prepare a 2016 Individual Income Tax Return for the taxpayers.

Selected personal information:

	James	Jean
Date of Birth	January 31, 1945	July 4, 1961
Social Security Number	448-55-9998	448-55-9999
Presidential Election Campaign	No	No

Jean worked as a phone sales representative, and James lists his occupation retired.

James and Jean have a son Adam, 6/1/2001, SS# 448-55-1122. Adam lived with them all year and attended school. He has no income to report.

Income and expenses as presented by James:

1. On July 15, 2016, James moved across the state of Oklahoma from Idabel, and meets both the distance and time tests requirements for deducting moving expenses. He drove his personal automobile 194 miles one way for the move and paid $12 in tolls while en route. James and Adam spent $52 on meals during the trip. He paid a moving company $1,290 to move his household goods from his old residence to the new residence.

2. James lists his current address as 200 N. University Dr., box 101, Edmond, OK 73034. His phone number is 405-974-2000.

3. James worked for Atlantic Coast Dining, Inc. in the dish room in Idabel, as a means of keeping busy until he decided to relocate for better employment opportunities for himself, and better education opportunities for Adam.

4. James W-2 (from Atlantic Coast) contained the following information: box 1 (wages) $13,234, box 2 (federal income tax withheld) $1,421, box 3 $15,234, box 4 $945, box 5 $15,234, box 6 $221, box 14 $2,000 (other), and box 17 (state income tax withheld) $610.

5. Jean worked for Institutional Operation Co. until she passed away. Her W-2 contained the

following information: boxes 1, 3 & 5 $7,324, box 2 $308, box 4 $454, box 6 $106 & box 17 $125.

6. James received a 1099-INT reporting $14,000 in interest income from the Bank of America, NA. Jean cashed a jointly owned US EE Savings Bond at the Bank of America on May 2nd. She had a basis of $50 in the bond and received a total of $105 in the transaction. James owned several municipal bonds issued by the City of Dallas. He received a 1099-INT reporting a total of $772 in interest income on these.

7. James received a 1099-DIV reporting $8,675 in qualified dividends from AT&T stock that he has owned for more than 20 years.

8. James cashed in on retirement savings as follows:

Income from the Teachers Retirement System. His 1099-R reports a gross distribution of $13,867, with a taxable amount of $13,450. He had federal income tax withheld $950 and state income tax withhold of $581.

He also received a 1099-R for a traditional IRA normal distribution showing a gross distribution of $8,175. He had federal income tax withheld of $428 and state income tax withheld of $49. The distribution code was 7.

9. The state sent James a 1099-G reporting a state income tax refund of $576 for 2016. James and Jean did itemize on their 2015 tax returns and deducted state income taxes paid. Their itemized deductions in 2015 totaled $18,900, including $2,020 for state income taxes.

10. James also received a SSA-1099. Box 5 reported $15,751 in total benefits with Medicare premiums of $1,062 and $170 withheld for federal income tax purposes. James also served as a juror for one day but was dismissed by the judge when word arrived at the courthouse that Jean had passed away. He received $75 for one days jury duty pay.

11. James sold the family home in Idabel (1021 S. Main, Idabel, OK 73046), before he moved for $595,000. James and Jean had paid $220,000 for the home in 1998 when they purchased it. They had made no capital improvements to the home, James then purchased a new home in Edmond for $275,000, closing on September 16, 2016. James and Adam rented the home prior to closing on it. They made rental payments for 2 months totaling $2,400.

12. After moving to his current residence, James established a neighborhood watch business for his neighborhood on August 1, 2016. His neighborhood association gave him a 1099-MISC reporting nonemployee compensation of $5,956 for watch services provided during 2016. He incurred the following expenses for his business endeavor: $672 in printing fees, $1,108 in supplies used, and $581 in telephone expenses. He also drove 1,150 miles to carry out this activity patrol.

13. This sale below was reported to IRS only with proceeds price, no basis was determined by the broker.

On May 1, 2016, Jean and James sold 25,600 shares of WMT common stock for $1,177,600. This was to help them pay some of the overwhelming medical bills. They paid a total of $2,460 in broker fees in the disposition of the stock. Jean originally purchased the stock on March 20, 1980. She bought 100 shares of WMTs common stock for $3,175. Stock splits have been very profitable.

14. In trying to find a cure for Jeans illness, the Jones undertook several experimental treatments. Unfortunately, many of them were not covered by insurance (the Jones had qualifying insurance coverage for all of them for 2016). After insurance paid its portion of their medical expenses, they still paid $15,752 for prescription medications, $65,682 in doctors bills, and $175,001 for hospital bills and $6,800 for family medical coverage. Of these expenses, $27,000 of doctors bills and $64,000 of hospital bills were incurred in conjunction with medical treatment undertaken in Mexico. They traveled 2,175 miles for medical purposed during 2016.

Writing assignment: James wants to know if the foreign medical items can be deductible on this return research this question and using at least 3 different sources (one of which must be primary), explain why the foreign medical expenses may or may not be deductible. You should write this in a letter to the client format (see chapter 2 for an example).

15. They paid $798 in property taxes on their joint Idabel primary residence, and then James incurred and paid $444 on his new Edmond residence after the move, made a cash contribution to their church of $125,282 and another cash contribution of $1,500 to the Indonesian Disaster Relief Fund in Nepal. They paid $430 during 2016 for the preparation of their 2014 income tax returns and $125 to rent a safety deposit box at a local bank for important papers including tax returns. Proper documentation exists for all of the above. James incurred investment advice expenses of $1,500.

16. To try and meet new people in Edmond, James attended an art class at the local university spending $1,272 for tuition and related fees and qualifying materials during the fall semester of 2016. He spent another $200 for books and supplies.

17. James and Jean made quarterly payments during 2016 that totaled $57,000 for federal and $19,500 for state taxes.

Other:

Assume that the tax return will be prepared and filed on April 15, 2017.