Practice Set #2 James Stafford is age 68 in 2022 . He lives with his spouse at 1500 North Jamboree, Irvine, CA 92602 (which was sold in 2022 see below) His Social Security number is 122 652112 . James was divorced to his first wife in 2010 . He pays $30,000 annually of alimony to his ex-wife Beth Stafford (Social Security Number 558-55-7567). He married his new wife Julie Stafford (Social Security Number 223-312-2222) in 2013 she is 55 in 2022 . They purchased their lrvine home together right after their marriage on June 15, 2013. Julie Stafford does not work. They adopted two twin newboms bom on 1/2/2015. Their names are James Jr. and John Stafford. Their Social Security numbers are 232-90-8909 and 235-45-1987, respectively. James wholly owns Stafford Consulting LLC and provides arehitectural consulting services for which he uses the eash method of accounting. James formed this business after he lett his former employer "ABC Architects". His revenues and expenses are: Other income for James and Julic includes the following: During the year, James and Julic also had the following transactions: James worked from his home office. His home office is 450 square feet of their 2,350 square foot home. The office was used exclusively for his work in 2022 . The expenses related to his lrvine residence were the mortgage interest and taxes notcd below, utilities of $3,500, insurance of $2,500, HOA fees of $4,000, house cleaning of $1,800. intemet $1,475, and telephone $665 (Land line). No depreciation will be taken. James received social security benefits for the first-time starting January 1, 2022. His gross social security is $3,000 per month for 12 months. He was paid $2,000 per month which is net of Medieare health premiums. James withdrew $25,000 from his 401(k) with his former employer XYZ Architects Inc, in 2022. Fidelity is the investment company of the 401(k). This amount was reported on a 1099R in Box 1 and 2a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. He sold Trout, Inc, stock for $30,000 on March 12, 2022. He had purchased the stock on September 5, 2019, for $45,000. On December 10, 2022, James sold 500 shares of Apple Ine, stock for 575,000 he parchased over on January 15,2018 , for $200 a share. He then purchased 500 shares of Apple, Inc. stock on December 31, 2022, for $150 per share. Received an inheritance as the sole beneficiary on January 4,2022 , of $250,000, which is the fair market value of Land, he received from his Uncle Fester who passed away. His uncle paid $50,000 for the Land in 2010. James borrowed \$150,000 (Land Loan-Interest Only) to improve the property, He also received life insurance of $400,000 from his uncle's policy that he was the sole beneficiary. James used $200,000 of the insurance to purchase Angus, Inc, stock on May 31, 2022, and used the remaining amount of the life insurance to invest $200,000 in Fenway, Inc. stock on June 30,2022. Received Zone, Inc, stock worth $200,000 as a gifl from his cousin, Corey, on June 20,2017. His adjusted basis for the stock was $75,000. No gift taxes were paid on the transfer. Kyle had purchased the stock on April 1, 2012. James sold the stock on November 1, 2022, for $125,000. On October 15, 2022, James sold one-half of the Angus, Inc. stock for $200,000 and all the Fenway Stock for $180,000. James was notified on August 1, 2022, that Scully, Inc, stock be purchased from Scully, Inc. as one of their first investors on September 1, 2017, for 500,000 had become worthless. Total stock outstanding when he originally invested was $995,000. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy. He will not receive anything from the bankruptcy procecdings. On January 31, 2022, James received a pareel of land in Flagstaff, AZ worth $300,000 in exchange for a parcel of land he owned in Tempe, AZ. Because the Tempe parcel was worth $400,000, he also was paid $100,000 cash. Doug's adjusted basis for the Tempe parcel was $85,000. He originally purchased it on January 15,2015. During 2020, be loaned $125,000 to his brother, Malcolm. He executed a note and his brother paid interest and some principal payments on the note. The loan balance was $120,000 with $1,500 unpaid interest when his brother filed for Cb7 bankruptey on November 30,2022 , James was infomed on December 20, 2022, by the bankruptcy coant that he would not receive any further principal and interest payments on the note. On December 31, 2022, James sold the home in which he and Julie had been living in since their marriage. He will move into another home in 2022 . The sales price was $1,650,000, selling expenses were $150,000 (including commissions). James purchased the condominium for $400,000 and added a swimming pool of $40,000 and fixed up the house prior to sale and painted it for $20,000. On December 31,2022 , James sold the inherited land from his uncle. The consideration was. $950,000 installment note plus the assumption of the seller's mortgage (Land Loan) of \$150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2022, and December 31, 2023. The selling expenses were $30,000. He received the first installment payment of $300,000 on December 31,2022 . Assume he uses all available elections to minimize the tax consequences of this sale and made improvenents to the property with the entire $150,000 Land Loan. Assume James contributes to a SEP IRA and a 401(k). Include the maximum eligible amount he can contribute to both in his retum based on his income from his business. Assume he has a separate plan 401k for his employees with a match. Doug's broker advised him to invest $190,000 on January 15, 2022. Doug's Share of the Ordinary Loss for 2022 from We Bake Cupcakes LLC per his K-1 (taxed as a partnership for tax purposes) was $205,000. Drafting Equipment was destroyed by a fire in the office. The basis of the equipment was $15,000 and it was destroyed. There was $3,000 of insurance on the equipment. Additional potential deductions, exclusive of the aforementioned information, are as follows: During the year, James made estimated Federal income tax payments totaling $200,000 equally on the quarterly due dates ( $50,000 per quarter). Compute James and Julie's lowest net tax payable or refund due for 2022 if he makes any available elections. Prepare the tax forms for your compuations, you will need Forms 1040. 3468,4562,4684,4797,6252,8582,8824,8826,8889,8995 and 8949 and Schedules 1, 2, 3, A, B, C, D, E and SE and any other forms that are necessary to prepare a complete and accurate tax retum. Intuit Pro connect has been provided to you. Make sure you prepare the federal tax retum with all the required tax schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document all your assumptions of WHY you treated each item in the problem as taxable, nontaxable, deductible, or nondeductible. Also, you need to analyze the results of 2022 and his impact because of tax refom. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a full reduction of all the points on the assignment. Be creative and thorough on your write up. Practice Set #2 James Stafford is age 68 in 2022 . He lives with his spouse at 1500 North Jamboree, Irvine, CA 92602 (which was sold in 2022 see below) His Social Security number is 122 652112 . James was divorced to his first wife in 2010 . He pays $30,000 annually of alimony to his ex-wife Beth Stafford (Social Security Number 558-55-7567). He married his new wife Julie Stafford (Social Security Number 223-312-2222) in 2013 she is 55 in 2022 . They purchased their lrvine home together right after their marriage on June 15, 2013. Julie Stafford does not work. They adopted two twin newboms bom on 1/2/2015. Their names are James Jr. and John Stafford. Their Social Security numbers are 232-90-8909 and 235-45-1987, respectively. James wholly owns Stafford Consulting LLC and provides arehitectural consulting services for which he uses the eash method of accounting. James formed this business after he lett his former employer "ABC Architects". His revenues and expenses are: Other income for James and Julic includes the following: During the year, James and Julic also had the following transactions: James worked from his home office. His home office is 450 square feet of their 2,350 square foot home. The office was used exclusively for his work in 2022 . The expenses related to his lrvine residence were the mortgage interest and taxes notcd below, utilities of $3,500, insurance of $2,500, HOA fees of $4,000, house cleaning of $1,800. intemet $1,475, and telephone $665 (Land line). No depreciation will be taken. James received social security benefits for the first-time starting January 1, 2022. His gross social security is $3,000 per month for 12 months. He was paid $2,000 per month which is net of Medieare health premiums. James withdrew $25,000 from his 401(k) with his former employer XYZ Architects Inc, in 2022. Fidelity is the investment company of the 401(k). This amount was reported on a 1099R in Box 1 and 2a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. He sold Trout, Inc, stock for $30,000 on March 12, 2022. He had purchased the stock on September 5, 2019, for $45,000. On December 10, 2022, James sold 500 shares of Apple Ine, stock for 575,000 he parchased over on January 15,2018 , for $200 a share. He then purchased 500 shares of Apple, Inc. stock on December 31, 2022, for $150 per share. Received an inheritance as the sole beneficiary on January 4,2022 , of $250,000, which is the fair market value of Land, he received from his Uncle Fester who passed away. His uncle paid $50,000 for the Land in 2010. James borrowed \$150,000 (Land Loan-Interest Only) to improve the property, He also received life insurance of $400,000 from his uncle's policy that he was the sole beneficiary. James used $200,000 of the insurance to purchase Angus, Inc, stock on May 31, 2022, and used the remaining amount of the life insurance to invest $200,000 in Fenway, Inc. stock on June 30,2022. Received Zone, Inc, stock worth $200,000 as a gifl from his cousin, Corey, on June 20,2017. His adjusted basis for the stock was $75,000. No gift taxes were paid on the transfer. Kyle had purchased the stock on April 1, 2012. James sold the stock on November 1, 2022, for $125,000. On October 15, 2022, James sold one-half of the Angus, Inc. stock for $200,000 and all the Fenway Stock for $180,000. James was notified on August 1, 2022, that Scully, Inc, stock be purchased from Scully, Inc. as one of their first investors on September 1, 2017, for 500,000 had become worthless. Total stock outstanding when he originally invested was $995,000. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy. He will not receive anything from the bankruptcy procecdings. On January 31, 2022, James received a pareel of land in Flagstaff, AZ worth $300,000 in exchange for a parcel of land he owned in Tempe, AZ. Because the Tempe parcel was worth $400,000, he also was paid $100,000 cash. Doug's adjusted basis for the Tempe parcel was $85,000. He originally purchased it on January 15,2015. During 2020, be loaned $125,000 to his brother, Malcolm. He executed a note and his brother paid interest and some principal payments on the note. The loan balance was $120,000 with $1,500 unpaid interest when his brother filed for Cb7 bankruptey on November 30,2022 , James was infomed on December 20, 2022, by the bankruptcy coant that he would not receive any further principal and interest payments on the note. On December 31, 2022, James sold the home in which he and Julie had been living in since their marriage. He will move into another home in 2022 . The sales price was $1,650,000, selling expenses were $150,000 (including commissions). James purchased the condominium for $400,000 and added a swimming pool of $40,000 and fixed up the house prior to sale and painted it for $20,000. On December 31,2022 , James sold the inherited land from his uncle. The consideration was. $950,000 installment note plus the assumption of the seller's mortgage (Land Loan) of \$150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2022, and December 31, 2023. The selling expenses were $30,000. He received the first installment payment of $300,000 on December 31,2022 . Assume he uses all available elections to minimize the tax consequences of this sale and made improvenents to the property with the entire $150,000 Land Loan. Assume James contributes to a SEP IRA and a 401(k). Include the maximum eligible amount he can contribute to both in his retum based on his income from his business. Assume he has a separate plan 401k for his employees with a match. Doug's broker advised him to invest $190,000 on January 15, 2022. Doug's Share of the Ordinary Loss for 2022 from We Bake Cupcakes LLC per his K-1 (taxed as a partnership for tax purposes) was $205,000. Drafting Equipment was destroyed by a fire in the office. The basis of the equipment was $15,000 and it was destroyed. There was $3,000 of insurance on the equipment. Additional potential deductions, exclusive of the aforementioned information, are as follows: During the year, James made estimated Federal income tax payments totaling $200,000 equally on the quarterly due dates ( $50,000 per quarter). Compute James and Julie's lowest net tax payable or refund due for 2022 if he makes any available elections. Prepare the tax forms for your compuations, you will need Forms 1040. 3468,4562,4684,4797,6252,8582,8824,8826,8889,8995 and 8949 and Schedules 1, 2, 3, A, B, C, D, E and SE and any other forms that are necessary to prepare a complete and accurate tax retum. Intuit Pro connect has been provided to you. Make sure you prepare the federal tax retum with all the required tax schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document all your assumptions of WHY you treated each item in the problem as taxable, nontaxable, deductible, or nondeductible. Also, you need to analyze the results of 2022 and his impact because of tax refom. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a full reduction of all the points on the assignment. Be creative and thorough on your write up