PROBLEM 1 Roger R. and Michelle N. Stewart (ages 45 and 46 are married and live at 641 Cody Way, Casper, WY 82609. Roger is a consulting engineer, and Michelle is a paralegal. They file a joint retum and use the cash basis for tax purposes. 1. Trained as a mining engineer, Roger has developed considerable expertise in the treatment and disposition of waste material. He is also well versed in the Federal and state requirements for land reclamation projects, Roger operates a consulting business through which he advises clients on these matters. Roger's business activity code is 541990. Most of his clients are small and medium-size mine owners/operators located in Wyoming and contiguous states (es. Montana Idaho, Utah). Usually, Roger is retained by a client on a contract fee basis and is reimbursed for all out-of-pocket expenses. In performing his services, Roger usually visits the job site and later submits his recommendations in a written report along with a statement for his services and expenses. Roger received the following amounts from his consulting business in 2018: Fees for services rendered $ 92,800 Expense reimbursements: Airfare $8.200 Meals 6,100 Lodging 5.200 Transportation (taxis, airport limos, car rentals) 920 Subtotal for expense reimbursement 20420 Total received $113.220 2. Roger also provided services for the following companies from his office, there fore, there are no travel expenses. These fees are not included in the receipts listed in item 1 above. Echo Mining Work done in December 2018 payment received January 2019 $5,100 Sesa Mining: Work done in December 2017, payment received January 2018 4,400 Cormorant Mining:Work done in March 2018 no payment received to date 3,700 Since Cormorant Mining is currently in bankruptcy, Roger does not expect to collect any of this fee: APPENDIX E Practice Set Astigments-Comprehensive tax Return Problems Other expenses paid by Roger in 2018 relating to his practice are as follows Contribution to HR 10 Keoghi retirement plan $9,000 Premiums on medical insurance covering selt spouse, and dependents) 3.800 Supplies landscape models purchased from topographer for projects 3200 Advertising in trade journals 2.400 Once expense 1.200 Business phone and internet service Sute occupation license -.pdf A L ab Assignment 87.docx A APPENDIX E Practice Set Assignments. Comprehensive Tax Retum Proble Other expenses paid by Roger in 2018 relating to his practice are as follows Contribution to H.R. 10 (Keogh) retirement plan Premiums on medical insurance covering self spouse, and dependents) Supplies-landscape models purchased from topographer for projects Advertising in trade journals Office expense Business phone and internet service State occupation license Subscriptions to trade journals Membership dues to trade associations $9,000 3,800 3,200 2.400 1.200 860 300 240 180 Roger operates his consulting business out of an office in his home. Twenty per cent of the 3,000-square-foot living area is devoted to the office. Roger inherited the home on Cody Way from his father who died on June 6, 2011. At that time. the home had a fair market value of $400,000 ($10,000 of which was allocated to the land). The Stewarts mowed into the home in autumn of 2011, and Roger immediately set up his home office. The home's current fair market value is $500,000 ($50,000 allocated to the land), County land records reflect that Roger's father bought the land in 1972 for $6,000 and built the house in 1976 at a cost of $60,000. Roger depreciates the business use of his home using MACRS. Additional 2018 costs related to the home are as follows: Utilities Repairs and maintenance Insurance $4,800 2,900 2.300 The 2018 property taxes and mortgage interest are listed in item 15. In addi tion to the repairs and maintenance noted above, Roger had the office repainted at a total cost of $1,200. Over the years, Roger has properly deducted the cost of all the furniture and equipment used in his office either as $ 179 expense or bonus depreciation in the year those assets were placed in service. On March 5, 2018, Roger purchased a heavy-duty, fire-resistant file cabinet with security vault features for $4.800. He made the acquisition to safeguard and maintain the privacy of dient data Con- sistent with past years, Roger prefers to avoid capitalizing and depreciating the cabinet if the law allows On February 4, 2017. Roger paid $41.000 (including sales tax) for an Infiniti crossover SUV (gross weight under 6,000 pounds). No trade-in was involved, and he did not claim any $ 179 expense or bonus depreciation on the cost last year. Under the actual operating cost method, he depreciates the SUV using MACRS. (Hint: See Table 3 in the instructions to Form 4562.) His operating expenses for the Infiniti for 2018 are as follows: $3,300 600 Gasoline Auto Insurance Repairs Auto dub dues Oil changes and lubrication License and registration KE Practice Set Assignments - Comprehensive Tax Return Proble 15. In addition to the items already noted, the Stewarts had the following expendi- tures for 2018 $7.800 8.700 Medical and dental bills for the Stewarts (other than those relating to Vivian, see item 13) Charitable contributions (not including Vivian's pledge, see item 13) Ad valorem property taxes on personal residence Interest on home equity loan used to finance the purchase of a recreational vehicle in April 2018 5.800 The Stewarts drove the Suburban 420 miles to various medical and dental appointments. Wyoming has no state or local income tax but does impose a general sales tax. The county in which they live imposes an additional local sales tax of 1%. Although they do not keep track of their sales taxes, the Stewarts paid $1,600 of sales tax on the recreational vehicle they purchased in April 2018 16. Besides Vivian (see item 13), the Stewarts' household includes two daughters Mckenna cage 19) and Kayleigh (age 16), and one son, Jared (age 10. McKenna graduated from high school in 2017. She earned $19,000 during 2018, all of which she put into her college savings account. She heads off to college in fall 2019. Kayleigh and Jared are full-time students in high school and middle school respectively, Kayleigh earned $1,800 from a summer job, which she put into her college savings account. For tax year 2017, the Stewarts had a Federal income tax overpayment of $150, which they applied toward their 2018 income tax. Michelle's income tax with holdings for the year are $5,100, and the Stewarts made Federal quarterly tax payments totaling $12,000 ($3,000 each installment). 18. Relevant Social Security numbers are as follows: Name Social Security Number Roger Stewart Michelle Stewart Vivian Olson McKenna Stewart Kayleigh Stewart Jared Stewart 111-11-1112 123-45-6785 123-45-6786 123-45-6787 123-45-6788 123 45 6798 Requirements Prepare a 2018 Federal income tax return with appropriate supporting forms and sched- ules for the Stewarts. In doing this, follow these guidelines: Make necessary assumptions for information not given but needed to complete the return The Stewarts are preparing their own return The Stewarts have the necessary written substantiation (es records, receipts) to support the transactions reported in their tax return. . If the Stewarts have an overpayment of tax, they want it applied to their 2019 The Stewarts do not wish to contribute to the Presidential Election Campaign Fund PROBLEM 1 Roger R. and Michelle N. Stewart (ages 45 and 46 are married and live at 641 Cody Way, Casper, WY 82609. Roger is a consulting engineer, and Michelle is a paralegal. They file a joint retum and use the cash basis for tax purposes. 1. Trained as a mining engineer, Roger has developed considerable expertise in the treatment and disposition of waste material. He is also well versed in the Federal and state requirements for land reclamation projects, Roger operates a consulting business through which he advises clients on these matters. Roger's business activity code is 541990. Most of his clients are small and medium-size mine owners/operators located in Wyoming and contiguous states (es. Montana Idaho, Utah). Usually, Roger is retained by a client on a contract fee basis and is reimbursed for all out-of-pocket expenses. In performing his services, Roger usually visits the job site and later submits his recommendations in a written report along with a statement for his services and expenses. Roger received the following amounts from his consulting business in 2018: Fees for services rendered $ 92,800 Expense reimbursements: Airfare $8.200 Meals 6,100 Lodging 5.200 Transportation (taxis, airport limos, car rentals) 920 Subtotal for expense reimbursement 20420 Total received $113.220 2. Roger also provided services for the following companies from his office, there fore, there are no travel expenses. These fees are not included in the receipts listed in item 1 above. Echo Mining Work done in December 2018 payment received January 2019 $5,100 Sesa Mining: Work done in December 2017, payment received January 2018 4,400 Cormorant Mining:Work done in March 2018 no payment received to date 3,700 Since Cormorant Mining is currently in bankruptcy, Roger does not expect to collect any of this fee: APPENDIX E Practice Set Astigments-Comprehensive tax Return Problems Other expenses paid by Roger in 2018 relating to his practice are as follows Contribution to HR 10 Keoghi retirement plan $9,000 Premiums on medical insurance covering selt spouse, and dependents) 3.800 Supplies landscape models purchased from topographer for projects 3200 Advertising in trade journals 2.400 Once expense 1.200 Business phone and internet service Sute occupation license -.pdf A L ab Assignment 87.docx A APPENDIX E Practice Set Assignments. Comprehensive Tax Retum Proble Other expenses paid by Roger in 2018 relating to his practice are as follows Contribution to H.R. 10 (Keogh) retirement plan Premiums on medical insurance covering self spouse, and dependents) Supplies-landscape models purchased from topographer for projects Advertising in trade journals Office expense Business phone and internet service State occupation license Subscriptions to trade journals Membership dues to trade associations $9,000 3,800 3,200 2.400 1.200 860 300 240 180 Roger operates his consulting business out of an office in his home. Twenty per cent of the 3,000-square-foot living area is devoted to the office. Roger inherited the home on Cody Way from his father who died on June 6, 2011. At that time. the home had a fair market value of $400,000 ($10,000 of which was allocated to the land). The Stewarts mowed into the home in autumn of 2011, and Roger immediately set up his home office. The home's current fair market value is $500,000 ($50,000 allocated to the land), County land records reflect that Roger's father bought the land in 1972 for $6,000 and built the house in 1976 at a cost of $60,000. Roger depreciates the business use of his home using MACRS. Additional 2018 costs related to the home are as follows: Utilities Repairs and maintenance Insurance $4,800 2,900 2.300 The 2018 property taxes and mortgage interest are listed in item 15. In addi tion to the repairs and maintenance noted above, Roger had the office repainted at a total cost of $1,200. Over the years, Roger has properly deducted the cost of all the furniture and equipment used in his office either as $ 179 expense or bonus depreciation in the year those assets were placed in service. On March 5, 2018, Roger purchased a heavy-duty, fire-resistant file cabinet with security vault features for $4.800. He made the acquisition to safeguard and maintain the privacy of dient data Con- sistent with past years, Roger prefers to avoid capitalizing and depreciating the cabinet if the law allows On February 4, 2017. Roger paid $41.000 (including sales tax) for an Infiniti crossover SUV (gross weight under 6,000 pounds). No trade-in was involved, and he did not claim any $ 179 expense or bonus depreciation on the cost last year. Under the actual operating cost method, he depreciates the SUV using MACRS. (Hint: See Table 3 in the instructions to Form 4562.) His operating expenses for the Infiniti for 2018 are as follows: $3,300 600 Gasoline Auto Insurance Repairs Auto dub dues Oil changes and lubrication License and registration KE Practice Set Assignments - Comprehensive Tax Return Proble 15. In addition to the items already noted, the Stewarts had the following expendi- tures for 2018 $7.800 8.700 Medical and dental bills for the Stewarts (other than those relating to Vivian, see item 13) Charitable contributions (not including Vivian's pledge, see item 13) Ad valorem property taxes on personal residence Interest on home equity loan used to finance the purchase of a recreational vehicle in April 2018 5.800 The Stewarts drove the Suburban 420 miles to various medical and dental appointments. Wyoming has no state or local income tax but does impose a general sales tax. The county in which they live imposes an additional local sales tax of 1%. Although they do not keep track of their sales taxes, the Stewarts paid $1,600 of sales tax on the recreational vehicle they purchased in April 2018 16. Besides Vivian (see item 13), the Stewarts' household includes two daughters Mckenna cage 19) and Kayleigh (age 16), and one son, Jared (age 10. McKenna graduated from high school in 2017. She earned $19,000 during 2018, all of which she put into her college savings account. She heads off to college in fall 2019. Kayleigh and Jared are full-time students in high school and middle school respectively, Kayleigh earned $1,800 from a summer job, which she put into her college savings account. For tax year 2017, the Stewarts had a Federal income tax overpayment of $150, which they applied toward their 2018 income tax. Michelle's income tax with holdings for the year are $5,100, and the Stewarts made Federal quarterly tax payments totaling $12,000 ($3,000 each installment). 18. Relevant Social Security numbers are as follows: Name Social Security Number Roger Stewart Michelle Stewart Vivian Olson McKenna Stewart Kayleigh Stewart Jared Stewart 111-11-1112 123-45-6785 123-45-6786 123-45-6787 123-45-6788 123 45 6798 Requirements Prepare a 2018 Federal income tax return with appropriate supporting forms and sched- ules for the Stewarts. In doing this, follow these guidelines: Make necessary assumptions for information not given but needed to complete the return The Stewarts are preparing their own return The Stewarts have the necessary written substantiation (es records, receipts) to support the transactions reported in their tax return. . If the Stewarts have an overpayment of tax, they want it applied to their 2019 The Stewarts do not wish to contribute to the Presidential Election Campaign Fund