Jerry& Amanda Smith - 2015 Tax Return Information

Family members and Dependents: The following is a list of information for Jerry and Amanda Smith for the tax year 2015. Jerry and Amanda are married and have three children Richard, Andrew and Susan. They live at 400 Main Street, Great Neck, NY 11425. Jerry is an attorney and he works for a Smith, Brown & Cooper a local law firm in New York. In addition, he has his own law practice. Amanda works as a Math Teacher for the NYC Board of Education. 2015 Tax Information regarding the Smiths and their dependents are as follows:

Name	Social Security No.	Age	Other Facts
Jerry Husband	111-11-1111	54	Lawyer
Amanda - Wife	224-32-2888	48	Math Teacher.
Richard (Son)	246-56-7788	23	Full-time student at SUNY Stony Brook Univ. Richard is very smart and his gross income from royalties is $135,000. This is from his science inventions and pending research projects.
Andrew (son)	456-78-8956	16	Attends the Bronx School of Science in N.Y. He lives at home with Mom & Dad. In 2015, he earned $175,000 from Royaltys from APPLE Corp., on an invention that he patented.
Susan (daughter)	666-66-6666	24	Susan attends Baruch Grad School. Susan is married to Stan and is supported by him. The Smiths occasionally contribute to Susan & Stans support.
Lorraine Smith (Amandas mother)	777-77-7777	82	Retired Nurse and Amandas Mother. She received $25,000 from her pension in 2015. The Smiths contributed over 50% of her support. She lives in New Jersey in her own apartment.
Edward James (Jerrys Uncle)	888-88-8888	57	Jerrys Uncle. He lives in NYC by himself. He receives 55% of his support from Jerry & Amanda. He earned $3,500 in 2015 from a part-time job.
Samantha Gatos	999-99-9999	47	Jerrys ex-wife. See note below.
Eric James	100-00-0000	19	Jerrys cousin. He had $3,000 of income from part-time work. He lived with the Smiths and was supported by them for the entire year.

Dependents: Assume that all other requirements are met by each potential dependent.

Jerrys Previous Marriage: Jerry is obligated to pay Alimony and Child Support as stated in the divorce decree to Samantha Gatos. He is required to make monthly payments of $650 and $500 respectively, for Child Support and Alimony. During 2015, Jerry made total payments of $12,500 to Samantha. Jerry and Samantha both agreed that the outstanding balance will be paid during 2015.

The Smiths W-2 information is as follows:

	Jerry	Amanda
Gross wages	130,000	60,000
Federal Withholding Taxes	35,000	15,000
NYS Withholding Taxes	13,000	6,000
NYC Withholding Taxes	6,500	3,000

Interest and Dividends earned by the Smiths and reported on Form 1099s are as follows:

Types of Interest / Dividends	Amounts
Interest on 3.75% 20 year US Treasury Bonds	10,500
Interest on NYS 4% General Obligation Bonds	8,500
Interest on N.J. 3.75% State Dormitory Bonds	5,000
Interest on CD Chase Bank	4,000
Interest - GE 4.65% 20 year bonds	6,500
Ordinary & Qualified Dividend Income Per Fidelity Statement	15,000

Other: During 2015, Amanda received a $5,000 Debt Forgiveness decree from Master Card. This concerned a disputed charge from Master Card which has now been forgiven.

Besides working for the Smith Brown & Cooper, Jerry also owns in his own law practice (Smith Legal Consultancy, LLC, EIN: 55-5687541, Business code: 541110, Accounting method: (Cash Basis), located at 245 Greenwich Street, New York, NY 10007. The Revenue and Expenses from his law practice are as follows:

Gross Revenue	450,000
Rent	125,000
Office Salaries	60,000
Office Supplies	11,000
Advertisement	9,000
Utilities	8,000
Phone/Internet	3,000
Accounting Fees	12,000
Health Insurance Plan Employees	15,000
Office Maintenance	5,000
Office Equipment (see Note 1)	200,000
Travel (see Note 2)	6,000
Miscellaneous	1,500
Damages (see Note 3)	120,000

Note 1 The category office equipment, includes computer servers, printers, computers, fax machines, phones, microwave, and office refrigerator. Jerry is unfamiliar with the tax treatment and therefore requires your help. He is greatly concern with the tax benefits available for the costs incurred for office equipment. (Hint: Should he capitalized and depreciate the equipment cost, or is there another more beneficial tax treatment?)

Note 2 Jerry visited Miami on a conference that was specific to his business. He spent a total of three days in Miami. However the conference was only for two days, but since Jerry loved the beach and the warm weather, he decided to stay another day. The total travel expenses incurred on the trip were $6,000.

Note 3 Smith Legal Consultancy, LLC, was sued by the US government, regarding a criminal violation of the U.S. Antitrust Laws. He entered a no-contest plea and paid the Treble Antitrust Damage Fine of 120,000 to settle the case.

Unreimbursed Job Related Expenses . Amanda attended a Mathematics Conference in Boston, MA during 2015. Her employers practice is to reimburse their employees for these conferences. Her total expenses incurred were 3,000. However, she was only reimbursed 1,800 as of December 31, 2015.

Jerry had no unreimbursed expenses for 2015.

Group Term Life Insurance

Smith, Brown & Cooper provided an $80,000 group term life insurance to Jerry, who is not a key employee.

Retirement Contributions During 2015, Mr. & Mrs. Smith each contributed 6,500 to their Traditional IRA accounts.

NYS Tax Refund

Mr. & Mrs. Smith received a 1099 for $15,000 representing a 2014 NYS Tax Refund which was received in 2015. The Smiths itemized their deductions in 2014.

Capital Transactions

Jerry sold the following securities during 2014:

Company	Shares	Selling Price	Date sold	Date Acquired	Cost / Tax Basis	Gain/Loss
IBM	2,000	200,000	12/01/14	02/15/12	240,000
T	1,000	38,000	06/12/14	02/21/87	28,000
GE	1,000	50,000	12/08/14	06/15/14	30,000
AAPL	1,000	60,000	11/15/14	02/07/14	95,000

Sale of Principal Residence (see Note 4)

Date of sale 11/01/15

Date Acquired 07/06/96

Selling Price $1,200,000

Adj. Basis 900,000

Expenses of sale 34,000

Sales Commission 66,000

Note 4 - Sale of Residence: Mr. & Mrs. Smith lived in this house for many years. It was acquired in 1995 at a cost of $700,000 and it was their principal residence. Over the years they made major improvements to their home and all capital improvements are documented. Mr. & Mrs. Smith wish to avail themselves of the $500,000 gain exclusion under IRC Sec 121.

Itemized Deductions - Medical

Medical Insurance premiums $12,000

Peloton Stationary Exercise Bike (see Note 5) 3,000

Doctor visits to MDs, & DDS, 20,000

Prescription Drugs 8,000

Travel Expenses (see Note 6) 4,500

Vitamins & Herbs for Mr. & Mrs. Smith 6,500

Visits to local Gypsies and

Fortune-Tellers (Mrs. Smith) 15,200

Medical Insurance reimbursements in 2015. 12,500

Note 5 Medical Expense: Jerry has weak muscles in his lower back. His personal physician prescribed a Peloton Stationary Exercise Bicycle to try to alleviate the pain in his lower back.

Note 6 Travel Expenses: Mrs. Smith took a trip to Miami after being diagnosed by her medical doctor with extreme stress and fatigue. She hopes that the warm weather will alleviate the stress and fatigue.

Taxes Paid

NYS & NYC Income Taxes See W-2 information

NYS Sales Taxes on purchase of Boat & Personal Living expenses $15,200

Real Estate Taxes 22,000

Personal Property Taxes (A NYS Personal Property Tax on Michaels Boat

based on the weight of the boat.) 10,000

Interest Expense

Interest on Home Mortgage $15,000

Points on home mortgage 6,000

Mortgage Insurance Premiums 4,500

Charitable Contributions

Cash contributions to recognized public charities $24,000

Prior year carry forward charitable contributions 5,000

Donations of Property:

Paintings & Sculpture: (see Note 7)

Cost $ 10,000

FMV 22,000

Note 7 - Contribution of Property: The painting and sculpture were appraised by a reputable company. Jerry believes that the estimated FMV should be $40,000 and not $22,000 as declared by the appraisal company.

Miscellaneous Deductions

Tax Return Preparation $2,500

Legal fees Estate Planning 4,000

Safe Deposit Box at Chase used to safeguard stock certificates. 300

Other Expenses

Gambling losses (see Note 8) $44,000

Note 8 - Gambling Losses: Mr. Smith enjoys gambling and he considers himself to be

a Doctor of the Black Jack Table. During 2015 he won $14,000 and incurred losses of $58,000. His net gambling losses amounted to $44,000. After his Summer 2015 winnings streak, he has been constantly losing!

Note 9- Child & Dependent Care Expenses and Child Care Credit : The Smiths want to claim Child & Dependent Care Expenses and the Child Care Credit. During 2015 the Smiths spent $6,000 on an educational summer travel program for their son Andrew.

Please Comment on whether the Smiths would qualify to deduct any Child and Dependent Care expenses or qualify for the Child Credit.

REQUIRED:

1) Prepare the following Tax Forms, Schedules, Worksheets and Notes for Mr. & Mrs. Smith for the Tax Year 2015:

Form 1040

Schedule A

Schedule B

Schedule C

Schedule D and Form 8949

Form SE (Use Short Form)

Tax computation worksheet for Dividends & Capital Gains

Any other worksheet or summary schedule, that may be applicable

2) As Page #1, of your solution, prepare a Summary schedule of your Tax findings, Use the following categories and fill in your numbers on the schedule:

- Number of Personal Exemptions claimed

- Gross Income,

- Deductions for AGI,

- Adjusted Gross Income (AGI)

- Itemized Deductions or Standard Deduction,

- Taxable Income,

- Tax Liability

- Tax Due or Amount of Refund.

3) You must provide comments on the qualification of each dependent and on each of the nine notes in the project. For each item, starting with Dependents and Family Members, you must write a short explanation as to your tax treatment, explaining why you handled it the way you did.

Some Additional Notes:

Do not compute the AMT Tax or the Pease Limitations (limitations affecting itemized deductions or personal exemptions for high income taxpayers).

The project must be assembled in the correct order with the summary page by category and amount, as Page #1.

Your Notes on qualification of dependents and your comments on the nine notes in the project, must be typed and properly identified.