Robert T. and Lisa J. Jones (ages 52 and 51) are married and live at 5555 Orange Blossom Trail, Dallas, TX 75080. Robert is the regional manager for a gaming company (MGM), while Lisa is a self-employed CPA. They file a joint return and use the cash basis for tax purposes.

1. Robert receives a yearly salary of $250,000, plus an annual bonus, from MGM. The annual bonus is determined in December of each year but not paid until January of the following year. Robert's bonus is $55,000 for 2013 (received in 2014) and $83,000 for 2014 (received in 2015). Robert participates in his employer's pre-tax group health insurance plan to which he contributed $9,100 in 2014 for medical coverage. MGM does not provide any retirement benefits, but it has established a 401(k) plan to enable its employees to make voluntary contributions. Robert contributed $28,000 to the plan in 2014-and MGM made a matching contribution of $9,000.The company provides an office for Robert's use that is located at Suite 419, 110 Palm Boulevard, Dallas, TX. (you need to determine what the total wages on Form W-2 will be based on the numbers noted above-do not calculate medicare/social security payments.

2. Robert's employment-related expenses (which MGM reimbursed Robert a total of $10,000) for 2014 are as follows:

Airfare $5,100

Lodging: not at a MGM $6,200

Lodging: value of stays at a MGM $3,300

Meals $800

Entertainment $350

Car rentals, limos, taxis $1,750

While on business trips in his car, Robert was caught in several small-town speed traps and paid fines of $2,500.

3: Lisa is a licensed CPA who works part-time on a consulting basis. Her major clients are real estate developers (both residential and commercial). Because she limits her engagements, she does not have a separate office but does her work at the client's premises or in her office at home (see item 4 below). Her business expenses for 2014 are summarized below:

Supplies $5,000

Legal $7,000

CPA license fee $1,500

Subscriptions to professional journals $6,500

Dues to professional organizations $1,250

Purchase of a new computer for the office $6,000

Volunteer teacher at a local university-the fair market value

of the time that she spends is- $10,000

She would have been billing clients an equivalent amount

In addition, she drove the family Acura (purchased on June 7, 2013) 9,000 miles on her job assignments. Regarding the Acura, Lisa uses the automatic mileage method for tax deduction purposes. She drove the car for 20,000 miles during the year.

4. Home office: Lisa uses 400 sq. feet of a 4,000 sq. foot house-which was acquired in 2012, as her office. The office has a door and used to be a bedroom. There is a television in the room and Lisa occasionally watches TV in that room while working-if she falls asleep, she will stay there the entire night. The house has the following expenses:

Ad valorem taxes on personal residence $10,000

Interest on home mortgage $23,000

Home equity loan interest of-

The proceeds were used to finance a purchase of

A personal use auto $10,000

Repairs to roof-resulting from storm damage $10,000

Utilities $5,000

She is looking for a simplified method of deducting an office at home so she does not need to track expenses or be concerned about potential recapture in the future.

5. In addition to the above, the Polks had the following stock transactions during the year:

Stock Date Acquired Date Sold SalesPrice Purchase Price

150 sh Pfizer Corp 5/12/89 8/15/14 $16,000 (1)

300 sh Texas Instr. 7/30/94 10/25/14 $17,100 (2)

50 sh Allergan 6/10/09 10/23/14 $1,525 $1,800

25 sh ExxonMobil 4/28/13 9/4/14 $900 $2,700

60 sh Texaco 9/11/13 10/27/14 $10,410 $29,100

300 sh HulaHoop 1/7/08 12/2014 $ 6,125 $3,150

(1)Lisa received a gift of 150 shares of Pfizer Corp stock on 5/12/89- it was gifted to her by her father. He acquired the stock on 10/27/81 for $1,300. In 2/00 the stick split 2 for 1.

(2) The Joness acquired 500 shares of Texas Instrument stock for $7,810. Shortly after the purchase, they received a nontaxable stock dividend of 10%.

6. On August 5, 2010, Robert purchased 5,000 shares of Groupon common stock for $40 a share as

part of its initial public offering. The corporation was formed to establish and operate farmers'. markets in mid-size cities throughout the United States. Although some market locations were profitable, as a whole the venture proved to be a failure. By December 2014, Groupon was taken over by creditors, and its stock became worthless.

7. Besides the items previously noted, the Polks had the following receipts for 2014:

Lisa's consulting income $175,000

Interest income:

City of Dallas bonds $12,000

Ford Motor Company bonds $19,000

Loan repayment by Sarah Duval $30,000

Cash gifts from Lisa's parents $20,000

Federal income tax refund (2013 return) $9,000

Lisa's consulting income includes a $7,000 payment for work she did in 2013 (collected in 2014) but does not include $25,000 she billed in November for work performed in 2014 (collected in 2015). One client who has owed her $6,000 for work done in 2012 was convicted of arson in 2014and is serving time in solitary confinement in a maximum security Federal prison. Lisa feels certain that she will never-ever collect the $6,000.

8. In addition to the items already mentioned, the Polks had the following expenditures

for 2014:

Life insurance premiums $4,000

Medical and dental expense not covered by insurance $14,000

Medical insurance noted above

Taxes:

State and local sales taxes (actual amount paid) $8,000

Contributions-

Salvation Army (Tampa branch) $11,000

Contribution to an indigent local family

that has fallen on hard times $3,000

Committee to reelect the Bill/Hill President (CREEP)

of the US $10,000

Stock-held for more than one year having a basis of

$10,000 and a fair market value of $30,000

to a charity organized in Canada

Stock held for less than one year having a basis

of $10,000 and a fair market value - $6,000

Date acquired 10/1/13-contributed 2/1/14

To Goodwill Industries

During 2014, the Joness had gambling winnings of $8,200 and losses of $12,000-all supported by records.

9. The Joness maintain a household that includes two children, Anna Marie (age 17) and Tyler (age 20). Tyler graduated from high school on May 18, 2013, and is undecided about college. Ann Marie is a junior in high school. Tyler is an accomplished ventriloquist and during 2014 was able to earn $17,200 performing at various functions (e.g., weddings, bar mitzvahs, bachelor/bachelorette parties). He placed most of his earnings in a savings account and kept only a small amount to spend on himself.

11. Robert's Form W-2 from MGM shows $75,000 withheld for Federal income tax. MGM Company has an accountable expense reimbursement policy. The Polks also have made 4 quarterly income tax payments of $30,000 each. Lisa's professional activity code is 541310. Relevant Social Security numbers are noted below:

Social Security

Name Number Birth Date

Robert J. Polk 111-11-1111 07/01/1963

Lisa N. Polk 123-45-6781 03/20/1965

Anna Marie Polk 123-45-6784 06/30/1998

Tyler Polk 123-45-6788 05/02/1995

Requirement:

Prepare an income tax return (with appropriate schedules) for the Joness.

Make necessary assumptions for facts not stated in the problem.