Question:1

Use form 1040 and supporting schedules from the IRS website to complete form 1040 for 16

2016 income tax information David P. and Karen M. Stevens are married and file a joint income tax return. Their social security numbers are 133-99-4444 and 144-33-1111, respectively. They have two children, a son named Paul A. Stevens, age 14, social security number 132-99-6565 and a daughter, Anne M. Stevens, age 10, social security number 132-88-5656. David and Karen have been married for 16 years and purchased their current home in 2003. The family lives at 1075 Jackson Drive in Coastal City, GA 31133. David is a civil engineer employed by the city government. Karen is a psychiatrist. She is selfemployed and leases office space in a medical building near the local hospital. David and Karen report their income using the cash method. David is covered by a qualified retirement plan through his work. He partcipates in a group health insurance plan that covers all four members of the family. The health insurance plan for Karen's medical practice covers only the full-time receptionist. Income and expense information: David's salary (reportable W-2 amount) Karen's medical practice: Gross receipts Expenses on office books: Attorney's fees Business license Contract labor Country club dues paid by practice County property taxes on office furnishings, computer system, and other equipment Depreciation on office furnishings & equipment Health insurance for receptionist Malpractice insurance Payroll taxes Professional journals and literature Receptionist's salary Rent - office Repairs and maintenance Utilities Contribution to lobbying group representing doctors 146,500 352,100 2,200 500 2,740 4,200 980 3,240 5,340 26,700 3,010 4,270 33,400 32,000 2,670 10,240 1,860 Page 1 Other income and deductions: Dividends reported by brokerage account at Merrill and Jones. Total ordinary dividends of $7,660, of which $6,800 are qualified The dividends were paid by U.S. corporations operating domestically. Sale of land held for investment: Sold: 11/30/2016 Sales price Acquired: 08/15/2008 Cost 92,080 96,900 The land was not used in a trade or business by the taxpayers. The sales was reported on a Form 1099-B that does not disclose the basis of the property. Sale of stock in ABC Bank, Inc. Sold: 07/03/2016 Sales price 14,000 Acquired: 09/30/2005 Cost 11,760 Form 1099-B reported the sales proceeds also discloses the basis. There is a short-term loss of $4,260 carried over from the 2015 return. Interest income on family savings account at My Bank, Inc. Medical expenses incurred during 2016 that were not reimbursed by insurance: Doctors and dentists Hospital Contact lenses and glasses Real estate taxes on personal residence Home mortgage interest expense - received Form 1098 Charitable contributions paid by check: Church United Way Red Cross Individual retirement acccount contribution - Karen Contribution is made to a traditional IRA. Accounting fees were paid in April 2016 for the preparation of the couple's 2015 income tax returns. 60% of the fees are attributable to Karen's medical practice. 2,064 11,060 4,210 922 6,450 14,600 8,140 1,200 625 5,500 1,700 Page 2 Income taxes paid: David had the following 2016 income taxes withheld from his salary. Federal 26,800 State 6,460 The balance due on the couple's state income tax return for 2015 was $807. The balance was paid in April of 2016 when the return was filed. Federal 2016 estimated taxes paid by Karen: 4/15/2016 6/15/2016 9/15/2016 1/15/2017 18,000 18,000 18,000 18,000 State 2,500 2,500 2,500 2,500 Other information: Assume that David and Karen are not subject to alternative minimum tax. Do not prepare Form 6251 as part of the return. David and Karen's 2015 federal tax was $64,000. They should not be subject to penalty for underpayment of estimated tax, even if additional tax is owed with the return. Karen's office address: 1600 Medical Alley, Suite 550 Coastal City, GA 31133 Karen's business employer identification number: Business name: The Stevens Clinic 58-5553344 You are not required to complete Form 4562 (depreciation expense form) for the medical practice. Form 4562 is not required if there are no assets placed in service during the current taxable year. You may enter the depreciation expense for continuing assets on the forms reporting the medical practice income. All 1099 forms were filed by the medical office as required. The couple has no income from foreign sources. The couple received adequate document evidencing that the health insurance Page 3 coverage for the family for 2016 met the ACA requirements for the entire year. Page 4