Kelly and Chanelle Chambers Income Tax Return

Using the information provided, fill in a 2018 U.S. Individual Federal Income Tax Return for Kelly and Chanelle Chambers. Include:

Form 1040

Schedule 1 - Form 1040

Schedule 4 - Form 1040

Schedule 5 - Form 1040

Schedule A (Form 1040)

Schedule B (Form 1040)

Schedule C (Form 1040)

Schedule SE (Form 1040)

Form 4684

Tax Computation Worksheet (worksheet as to how tax was computed - no special form is required)

Notes to Tax Return (list any items in the problem either not used or only partially used with an explanation)

Note: No other forms are to be turned in. Ignore any Alternative Minimum

Tax, Additional Medicare Tax, Net Investment Income Tax, credits and penalties.

The following facts are available to help prepare Kelly and Chanelle Chambers U. S. Federal Individual Income Tax Return for their 2018 tax year.

Kelly and Chanelle Chambers, ages 47 and 45, are married and live at 584 Thoreau Drive, Durant, Oklahoma, 74701. Kelly's Social Security number is 254-93-9483 and Chanelle's is 374-48-2938. The Chambers have two children: Emma, age 23, and Chet, age 18. Their Social Security numbers are 385-64-8496 and 385-68-9462, respectively. Emma is a single full-time college student and earned $8,000 during the summer. Kelly and Chanelle help Emma through school by paying for her room, board, and tuition. Emma lives at home during the summer. Chet is also single, has a physical handicap (but is not permanently disabled) and lives at home. He attends a local university on a full-time basis and earned $4,000 working part-time for a marketing firm. In sum, Kelly and Chanelle provide more than 50% of both Emma's and Chet's total support for the year. Neither child provided more than one-half of his or her own support. If required, both children will file their own tax returns.

Kelly is a commercial pilot for a small regional airline, Westward Travels. His salary is $295,000, from which $70,000 of federal income tax and $15,000 of state income tax were withheld. Kelly also pays premiums for health, disability, and life insurance: $5,000 of the premium was for health insurance, $1,000 for disability, and $1,500 for life insurance.

Kelly's father passed away during the year. Kelly and Chanelle received $150,000 from the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums.

Chet's physician recommended that he see a physical therapist to help with his disability. Kelly paid the therapist $10,000 during the year because their insurance would not cover the bills. Kelly also paid $3,000 in dentist expenses for the family and $800 for eyeglasses for Emma. They have no medical mileage and no medical insurance reimbursements.

On October 17, 2018, Kelly and Chanelle went to the Choctaw Casino in Broken Bow, Oklahoma and won $16,000 at the blackjack table. The next night, they lost $10,000 at the slot machines. They have receipts for both their wins and losses.

Kelly and Chanelle gave $20,000 cash to the First Church of Durant, OK during the year. They also had the following other income and expenses:

Second Income Tax Return Project - Acct 3315 -003 (Spring Semester 2019) - Page 4

Real estate taxes on their personal residence $12,900

Property taxes on cars (determined by value) $700

Home mortgage interest (home purchased in 2017; mortgage balance at end of year: $750,000) $16,000

Personal Credit card finance charges $4,300

Tax return preparation fees ($600 is allocable to Chanelle's business) $1,200

Sales tax on major purchases during the year $6,300

Interest income from a Bank of Durant savings account $900

Interest income from City of Durant Bonds $800

Dividend income (Qualified and Ordinary) from 3M stock $1,500

Chanelle owns Chamber Networks (EIN 74-1234567), a cash-basis sole proprietorship that does network consulting. The business premises are located at 2301 Walden Way, Durant, Oklahoma, 74701. During the year, Chanelle's gross revenues were $155,000. She incurred the following expenses in her business:

Business Insurance $900

Rent payments $8,500

Telephone/cable expense $1,450

Utility expense $1,500

Software rental $5,400

Business journals and magazines $150

Training seminars $1,250

Supplies $1,100

Donations to a national political campaign fund $700

Estimated federal income tax payments $30,000

Estimated state income tax payment $8,000

In her office, she has computer equipment of $10,000 and office furniture and fixtures of $15,000, all of which was purchased in November 1, 2016. She elected to depreciation these assets rather than immediately expensing them under Section 179 or using bonus depreciation.

On August 1, 2018, a tornado passed over Durant. Kelly's sports car was completely destroyed during the storm when a tree fell on it. At the time of the tornado, the car had a FMV of $60,000 with a cost of $30,000 (purchased on September 1, 2016). Although an insurance claim was filed, the insurance company did not reimburse Kelly. The tornado was declared a federal disaster. FEMA disaster declaration number: AB-1235.

Complete Form 1040 and accompanying schedules for Kelly and Chanelle's federal income tax return for 2018 year. Use all rates, deductions, personal exemptions and dependency exemptions that are applicable for 2014. Ignore any Alternative Minimum Tax, Additional Medicare Tax, Net Investment Income Tax, Section 199A Qualified Business Income Deduction; credits and penalties.