Janice Morgan, age 24, is single and has no dependents. Janice works as an employee from Worldwide Publishing and also as a freelance writer. In January 2017, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her freelance writing business Writers Anonymous. Both Writers Anonymous and Janice operate on the cash basis She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45- 6789. During 2017, Janice reported the following income and expense items connected with her business Writers Anonymous (a sole proprietorship): Income from sale of articles Utilities Supplies Insurance Travel (assume fully deductible) Meals (used to entertain clients) Meals (used by Janice while on business travel) Social Club (Used to entertain clients) Client entertainment Expenses 75,000 23,500 7,900 1,800 5,000 2,300 600 600 4,000 1,000 Janice has the following personal items: $110,000 Wages from Worldwide Publishing Interest from checking account from First Bank Home mortgage interest paid to First Bank 4,000 10,000 (From acquisition debt, assume fully deductible) Property taxes on personal residence Charitable contributions Federal income tax withholding State income tax withheld 4,000 10,700 27,000 8,500 During the year, Janice invested S10,000 (tax basis and at-risk basis) into XYZ limited partnership (a passive investment). Her share of the limited partnership income for the year was S5,000, and Janice received a $7,000 distribution from XYZ limited partnership. During the year, Janice also invested $4,000 (tax basis and at-risk basis) into ABC limited partnership (a passive investment). Her share of the limited partnership loss for the year was S6,000. Because ABC limited partnership lost money during the year there were no distributions paid to partners. Prepare the 2017 Federal income tax return for Janice Morgan. You may work in groups no larger than 3 (i.e. 1, 2, or 3). Submt one tax return per group. Prepare the 2018 Federal income tax return for Janice Morgan. Assume that all the income and expenses are the same in both 2017 & 2018. The goal is to compare the different tax effects between the two different rules assuming the same income levels (1) Cover page with student names (2) 1040, (3) Schedule A, (4) Schedule C page 1, (5) calculation/explanation of the taxable portion from the limited partnerships (must include loss carryforwards as well as their classification), (6) calculation of self-employment tax, (7) calculation of tax, (8) Schedules 1 & 4 (2018 only). Normally, this tax return would require additional forms (Schedule B, Schedule E, Schedule SE, Etc.). However, I do not require them. Instead, the required calculations/explanations will be sufficient General Hints: 1) The Net income from the Schedule C (Writers Anonymous) will go on line 12 (1040 for 2017, and schedule 1 for 2018) 2) Line 17 (1040 for 2017, schedule1 for 2018) will include the income/loss from the limited partnerships. These are NOT subject to Self-Employment tax. 3) There should be something in line 27 (1040 for 2017, schedule 1 for 2018) 4) Line 57 (1040 for 2017, schedule 4 for 2018) is for the self-employment tax. SE tax is separate from and in addition to the tax calculated on line 44 5) The total from Schedule A should match line 40 (2017), line 8 (2018). 6) The taxpayer has a refund. 7) The FICA cap for 2017 is 127,200 and for 2018 is 128,400. 8) Assume that Janice has adequate health insurance. Hints for 2018: I) The itemized deductions will be different than 2017 2) Schedule C income will be different than 2017 3) Do not forget the Deduction for Qualified Business Income (new in 2018). Assume Janice qualifies for this deduction (she probably would not because she operates a service business), but for now I am more concerned with the mechanics of the deduction. In Chapter 15, we can discuss the rules in more detail. Assume that the QBI is a deduction equal to 20% of Qualified Income. This deduction will go on 1040 line 9 Qualified income includes the net total of Schedule 1 line 12,17, and 27 That is, line 12ne 17-line 27