Mr. & Mrs. Lapin 2019 Gross income And Adjusted Gross income

Following is a list of information for Michael and Diana Lapin for the tax year 2019. Michael and Diana are married and have three children, Amara, Bryan, and Skyla. They live at 120 Main Street, Flushing NY 11425. Michael is a lawyer working for a Native American law firm, Native American Justice, Inc. Diana works part-time for Creation, a genetic research lab. The Lapins' and their dependents information is as follows:

Michaels Previous Marriage:

Michael is obligated to pay Alimony of $6,000 and child support of $12,000 annually to Evelyn based upon their divorce decree dated 1/01/2018. However, as of December 31, 2019, he had only paid $13,000. Michael and Evelyn both agreed that the outstanding balance will be paid in January 2020.

The Lapin W-2 information is as follows:

Michael Diana

• Gross wages 140,000 80,000
• Federal Withholding Taxes 50,000 20,000
• NYS Withholding Taxes 10,000 7,000
• NYC Withholding Taxes 8,000 5,000

Interest and Dividends earned by the Lapin are as follows:

Types Amounts

• Interest on 3.75% 20 year US Treasury Bonds 3,500
• Interest on NYS 4% General Obligation Bonds 2,500
• Interest on N.J. 3.75% State Dormitory Bonds 5,000
• Interest on CD Chase Bank 1,000
• Dividends - GE 4.65% 20 year bonds (qualified) 3,500

Other: During 2019, Diana received a debt forgiveness of $2,500 from American Express.

Besides working for the Native America Law Firm, Michael also has his own private consulting practice (Lapin Legal Consultancy, LLC, EIN: 55-5687541, Business code: 541110, Accounting method: Cash Basis), located at 195 Chambers street, New York, NY 10007. The income and expenses associated with his practice are as follows:

• Gross Receipts 305,500
• Rent 125,000
• Office Salaries 75,000
• 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) 30,000
• 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. The items were placed in service during 2019. Michael 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 available tax treatment?

Note 2 Michael 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 two days, but since Michael loved the beach; he decided to stay another day. The total expenses incurred on the trip were 6,000.

Note 3 Lapin Legal Consultancy, LLC, was sued by the US government, regarding a criminal violation of antitrust laws. He entered a no-contest plea and paid the fine of 90,000 to settle the case.

Unreimbursed Job Related Expenses

Diana attended a Genetics conference in Boston, MA during 2019. Her employers practice is to reimburse their employees for these conferences. Her total expenses incurred were 3,000. However, she was only reimbursed 1,500 as of December 31, 2019.

Michael had no unreimbursed expenses for 2019.

Group Term Life Insurance

Native American Justice, Inc. provides $100,000 of group term life insurance for Michael, who is not a key employee. (Hint: dont forget to consider its effect on gross income). 762

Retirement Contributions

During 2019, Mr. & Mrs. Lapin each contributed 6,000 to their Traditional IRA accounts. Assume no AGI limitation prevents the deductions.

NYS Tax Refund

Mr. & Mrs. Lapin received a 1099 for $5,000 representing a 2018 NYS Tax Refund which was received in 2019. The Lapin itemized their deductions in 2018.

Capital Stock Transactions

Michael sold the following securities during 2019:

Company Shares Selling Price Date sold Date Acquired Tax Basis Gain/Loss

IBM 2,000 185,000 12/01/19 10/15/11 200,000 -15,000

TI 1,000 28,000 06/12/19 02/21/85 8,000 20,000

GE 1,000 30,000 12/08/19 06/15/19 50,000 -20,000

AAPL 1,000 85,000 11/15/19 02/07/19 80,000 5,000

Sale of Principal Residence (see Note 4)

Date of sale 06/30/2019

Date Acquired 01/01/2000

Selling Price $1,560,000

Adj. Basis 950,000

Other Selling Exp 34,000

Commission 4 % of sale price

Note 4 - Sale of Residence: Mr. & Mrs. Lapin lived in this house for many years. It was acquired in 2000 at a cost of $850,000 and it was their principal residence. Over the years they made major improvements to their home and all capital improvements are documented. Mr. & Mrs. Lapin wish to avail themselves of the $500,000 gain exclusion under IRC Sec 121.

Note 5 - Gambling Losses: Mrs. Lapin enjoys gambling in Las Vegas and she considers herself to be the Black-Jack Doctor. During 2019 she won 14,000 and incurred losses of 38,000. Her net gambling losses were 24,000. After her spring winnings, she has been on a consistent losing streak!

Other fact:

• Michael did not make any payments that requires him to file a 1099 and he did materially participated in his business.
• The business was started July 15, 2014.
• Michael made additional withholding through his W-4 to help offset his estimate taxes.
• The entire family receives health care benefits from his employer.
• Michael and Diana would like to contribute $3 to the presidential election campaign.

Instructions:

• Prepare the Lapin 2019 Gross Income
• The Lapins would like to contribute 50% of their refund to their 2014 estimate taxes.