Schedule B

Comprehensive Tax ProblemJoseph and Diane Smith1580 West StreetChatham, VA 24531Joseph and Diane are both 35 and have no dependents. If your clients receive a refund,they want the full amount refunded to them. Diane is currently pregnant and will give birthduring the next tax year.Joseph SSN: 400-20-0100Diane SSN: 200-40-8000Joseph works as a salesman. During the current year, Joseph earned a total compensationfrom his job of $125,000. Following are the deductions from his pay.Federal Withholding $20,000FICA (Social Security) Withholding $ 7,347Medicare $ 1,813Virginia Withholding $ 4,000Diane is a nurse and earned total compensation of $45,400. Following are the deductionsfrom her pay.Federal Withholding $ 5,000FICA (Social Security) Withholding $ 2,815Medicare $ 658Virginia Withholding $ 2,000Joseph and Diane have investments in stocks and have a saving account at a local bank.During the current year, they earned $1,450 in interest from the Bank of Virginia. Theyreceived qualified stock dividends of $5,950 from GE stock. They also traded in the stockmarket during the year and had the following results (just enter net amounts in the properschedule).Long Term Capital Gain $ 4,900Long Term Capital Loss $(3,200)Short Term Capital Gain $ 0Short Term Capital Loss $(7,800)They have no loss carryover from previous years.Joseph also owns side consulting business which he runs as a sole proprietor. He uses thecash method to account for this activity. He uses a room in his home exclusively foractivities related to this business. Joseph has opted to use the simplified method for adeduction for the business use of his home amounting to $1,500.

During the year, Joseph earned and received $12,500 from clients related to this business.His expenses were as follows:Advertising $175Supplies $500Legal Fees $750Liability Insurance $600The couple have the following additional expenses for the year:Health Insurance (after-tax) $ 4,400Doctor bills $ 470Real estate taxes $ 2,200Personal property taxes $ 400Mortgage Interest $15,600Charitable contributions cash $ 9,000Charitable contributions StockGE stock owed 5 years:Fair Market Value (FMV) $ 8,000Adjusted basis $ 2,000Tax preparation fees $ 750Note: Ignore any potential qualified business income deduction for the purposesof this project