Please complete the 2014 federal income tax return for Joseph and Diana Cohen

The Cohens received a New Jersey state income tax refund of $400 in May of 2014. The Cohens received the refund because they had overpaid their New Jersey state individual income tax in 2013. On their 2013 Federal income tax return, the Cohens deducted and received tax benefit for all of the state tax income taxes they paid in 2013.

Diana is a 10% owner in an advertising agency named Bright Ideas (BI) (EIN 20-1234567). BI is a Subchapter S corporation. The company reported ordinary business income for the year of $150,000. Diana received a K-1 from BI reporting her allocation of this business income. Sarah acquired the stock several years ago. Her basis in the stock before considering her 2014 income allocation was $92,000. Sarah is a passive owner with respect to this entity.

Diana is also a 20% owner in Natural Sunshine, Inc. (NS) (EIN 24-9876543). NS is a Subchapter S corporation. The company reported an ordinary business loss for the year of ($80,000). Diana received a K-1 from BI reporting her allocation of this business loss. Sarah acquired the stock several years ago. Her basis in the stock before considering her 2014 loss allocation was $45,000. Sarah is a passive owner with respect to this entity.

Joseph received 5,000 shares of restricted (common) stock from his employer on July 1, 2014. The terms of the restricted stock grant are such that if Joseph is still employed by Alternative Energy on July 1, 2019 the entire 5,000 shares will vest and become his property. Joseph, upon the advice of his tax advisor, prepared and filed an IRC Section 83(b) election on July 8, 2014. On July 1, 2014, shares were valued at $5 per share. Joseph estimates the value of the shares in five years will be at least $150 per share. Joseph notified Alternative Energy about the IRC Section 83(b) election in a timely manner. None of the income tax consequences of this restricted stock grant was included in the $118,325 reported as part of Josephs gross wages (see above).

In May, Joseph was injured in a home accident. The injury prevented Joseph from working for about a month. During this time, Joseph received $15,000 in disability payments attributable to a disability insurance policy. The disability policy premiums were paid on Josephs behalf as a nontaxable fringe benefit.