Jerry and Amanda are married and have three children Richard, Andrew and Susan. They live at 345 Main Street, Great Neck, N.Y. 11425. Jerry is an attorney and he is self-employed in his own law firm: Smith Legal Consultancy in Manhasset, NY. Amanda is a Research Scientist and works for Genetics Research, Inc. in Great Neck, NY. 2016 Tax Information regarding the Smithsand their dependents are as follows:

Name	Social Security No.	Age	Other Facts
Jerry Husband	111-11-1111	54	Lawyer and Self Employed.
Amanda - Wife	224-32-2888	48	Research Neuro-Geneticist.
Richard (Son)	246-56-7788	21	Full-time student at SUNY Buffalo Univ. Richard is very smart and his gross income from royalties is $125,000. This is from his science inventions and pending research projects.
Andrew (son)	456-78-8956	12	Attends Public School in Great Neck, N.Y. He lives at home with Mom & Dad.
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 2016, Jerry made total payments of $12,500 to Samantha. Jerry and Samantha both agreed that the outstanding balance will be paid during 2016.

The Smiths W-2 information is as follows:

	Jerry	Amanda
Gross wages	-0-	130,000
Federal Withholding Taxes		30,000
NYS Withholding Taxes		15,000
NYC Withholding Taxes		10,000

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

Amanda received a Debt Forgiveness from American Express Company in the amount of $5,000; this concerned a disputed charge which has now been forgiven.

Jerry is Self Employed in his own private law practice (Smith Legal Consultancy, EIN: 55-5687541, Business code: 541110, Accounting method: (Cash Basis), located at 225 Chambers street, New York, NY 10007. The Revenue and Expenses from his law practice are as follows:

Gross Revenue	505,000
Salary Expense Professionals	70,000
Rent	125,000
Office Salaries	35,000
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)	60,000
Travel (see Note 2)	6,000
Miscellaneous	1,500
Damages (see Note 3)	90,000

Note 1 The category office equipment, includes printers, computers, fax machines, percolators, 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 weather, he decided to stay another day. The total travel expenses incurred on the trip were $6,000.

Note 3 Smith Legal Consultancy, 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 Fineof $90,000 to settle the case.

Unreimbursed Job Related Expenses

Amanda attended a Genetics conference in Boston, MA during 2016. 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, 2016.

Group Term Life Insurance

Genetics Research , Inc. provided $80,000 of group term life insurance to Amanda, who is not a key employee. (Hint: Dont forget to consider its effect on gross income).

Retirement Contributions During 2016, Mr. & Mrs. Smith each contributed 6,500 to their Traditional IRA accounts. Assume that no AGI limitation prevents the deductions.

NYS Tax Refund

Mr. & Mrs. Smith received a 1099 for $15,000 representing a 2015 NYS Tax Refund which was received in 2016. The Smiths itemized their deductions in 2015.

Capital Transactions

Jerry sold the following securities during 2016:

Company	Shares	Selling Price	Date sold	Date Acquired	Cost / Tax Basis	Gain/Loss
IBM	2,000	200,000	12/01/16	02/15/13	140,000
XYZ	1,000	8,000	06/12/16	02/21/87	58,000
GE	1,000	50,000	12/08/16	06/15/15	30,000
AAPL	1,000	50,000	11/15/16	02/07/15	95,000

Sale of Principal Residence (see Note 4)

Date of sale 11/01/16

Date Acquired 07/06/95

Selling Price $1,200,000

Adj. Basis 900,000

Exp of sale 34,000

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 $10,000 ($5,000 H ; $5,000 Family)

Nike Exercise Rowing Machine (see Note 5) 5,000

Doctor visits to MDs, & DDS, 20,000

Prescription Drugs 8,000

Travel Expenses (see Note 6) 3,250

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

Visits to local Gypsies and

Fortune-Tellers (Mrs. Smith) 15,200

Medical Insurance reimbursements 12,500

Note 5 Medical Expense: Jerry has weak muscles in his lower back. His personal physician prescribed a Nike Rowing Exercise Machine 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 28,000

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 $20,000

Points on home mortgage 6,000

Mortgage Insurance Premiums 4,500

Charitable Contributions

Cash contributions to recognized public charities $25,000

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 ($1500 SCH C Law Practice; $1,000

Family Taxes) $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 2016 he won $14,000 and incurred losses of $58,000. His net gambling losses amounted to $44,000. After his Summer 015 winning 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 2016 the Smiths spent $6,800 on Child Care expenses for their son Andrew.

Please compute the amount of Child Care expenses allowed and Child Tax Credit allowed.

Note10 Education Credits: The Smiths spent $12,000 for tuition at SUNY Buffalo and $7,000 for Campus Housing. Mr. Smith would like to take advantage of the Education Credits available for Richard.

REQUIRED:

1) Prepare the following Tax Forms , Schedules, Worksheets and Notes for Mr. & Mrs. Smith For The Tax Year 2016:

Form 1040

Schedule A

Schedule B

Schedule C

Form SE (Use Long Form)

Schedule D and Form 8949

Tax computation worksheet for Dividends & Capital Gains

8) 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:

- Number of Personal Exemptions claimed

- Gross Income,

- Sch C Net Income (Loss)

- Deductions for AGI,

- Adjusted Gross Income (AGI)

- Itemized Deductions or Standard Deduction,

- Taxable Income,

- Tax Liability

- Tax Due or Amount of Refund.

3) Comment on The Tax Treatment for each of the TEN NOTES in the Project. For each Note in the project, (starting with Dependents and Family Members) you must write a short explanation as to your tax treatment, explaining why you handled it the way that you did.

4) Do not package the project in a fancy folder, a plain manila file folder or a stapled or fastened package is sufficient!