MOST IMPORTANT PART IS THE 1040 FORM PLEASE! NO ANSWERS ON THIS SITE HAVE THE 1040 FORM

Individual Income Tax Project 2 (15 points

Facts:

Davison Co. is in its first year of operations as a hardware and software retailer (with occasional consulting jobs). Davidson reports the following 2017 results (without respect to the type of entity):

Business Income:

Sales (net of returns and allowance)	$645,000
Gross Consulting Fees Collected	$30,000
Dividend Income (5% investment in Surreal Software Co.)	$4,000
Loss on Sale of Surreal Stock ($28,000 - $33,000, held 9 months)	($5,000)
Business Expenses and Costs:
Cost of Goods Sold	(142,200)
Salaries of five employees other than owner Dave Davidson ($50,000 each)	(250,000)
Payroll taxes paid on employees [(250,000 x 0.0765) + (35,000 x 0.060)]	(21,225)
Health Insurance coverage for employees	(25,000)
Interest Expense - Business Loans	(30,746)
MACRS depreciation on various company assets	(10,154)
Utilities, insurance, supplies, deliveries, and miscellaneous expenses	(54,185)
Contribution to public charities	(13,300)
Compensation of owners of Business
Reasonable salary compensation to Dave Davidson	(75,000)
Other cash payment to owner	(50,000)
Health Insurance coverage for Dave Davidson	(3,000)
Retirement plan contribution for owner (10% of reasonable salary)	(7,500)

Dave and Ellen Davidson (both age 43) file a joint federal income tax return in 2017. They do not have any dependents. In addition to any compensation/income from the business describes above, Ellen received a salary of $71,300 from ED Industries. Dave and Ellen also received $1,400 personal interest on a joint account, $1,200 personal dividends from jointly held Thomson Co. stock, and $9,200 from the sale of 100 shares of Thomson stock (originally acquired five years ago for $3,100).

Dave and Ellens personal expenses for 2017 include $14,000 state income taxes, $9,300 charitable contributions (not including the amounts mentioned above), $8,300 interest on personal home mortgage, and $4,181 of unreimbursed employee expenses by Ellen.

Required:

a. Assuming that Davidson Co is operated as a sole proprietorship, determine the Davidsons final federal income tax liability (including any self-employment tax).

Please complete Form 1040 Schedule A, Schedule C, Schedule D and Schedule SE.

Please complete the line 7 through the line 43 on Form 1040.

Please complete the line 1 through the line 29 on Schedule A.

Please complete the line 1 through line 31 on Schedule C.

Please complete the line 1 through line 6 on section A of short Schedule SE.

Please complete the line 1 through line 21 on Schedule D.