Sean B. (age 42) and Michelle R. (age 48) Atwell are married and live at 5944 Overhill Road, Mission Hills, MO 66208 (a suburb of Kansas City). Sean is employed as a chemist by HMT Pharmaceuticals, Inc., and Michelle is a self-employed doctor of anesthesiology They are calendar year, cash basis taxpayers. 1. HMT Pharmaceuticals develops and produces injectable medicines used in chem- otherapy treatments for cancer patients. Sean manages the Kansas City facility for an annual salary of $95,000. HMT makes contributions to a qualified defined contribution pension plan for all of its full-time employees. Although Sean also has the opportunity to make contributions to the plan, he chose not to do so in 2019. Sean participates in his employer's group health insurance plan to which he

PROBLEM 2-INDIVIDUALS (FORM 1040) Sean B. (age 42) and Michelle R. (age 48) Atwell are married and live at 5944 Overhill Road, Mission Hills, MO 66208 (a suburb of Kansas City), Sean is employed as a chemist by HMT Pharmaceuticals, Inc., and Michelle is a self-employed doctor of anesthesiology They are calendar year, cash basis taxpayers. 1. HMT Pharmaceuticals develops and produces injectable medicines used in chem- otherapy treatments for cancer patients. Sean manages the Kansas City facility for an annual salary of $95.000. HMT makes contributions to a qualified defined contribution pension plan for all of its full-time employees. Although Sean also has the opportunity to make contributions to the plan, he chose not to do so in 2019. Sean participates in his employer's group health insurance plan to which he contributed $4,000 in 2019 for medical coverage. These contributions are made with pretax dollars, so his taxable salary is reduced to $91,000 for W-2 reporting AVVENDIX Comm. is. Tufts Code of kolas ented from com- es following for lanner deral The health plan CONCES Scan, Miche, den Cerce. An additional $18) Lesbobedi HM provides all of its employees who the risk associated wh Sean's was the cable value of this insurance HMT generally reimburses Ses for expert company. However, as a matter of policy. W dnes to where Monthly dinner meetings of the Midwesten Cheras Dues to professional organizations Subscriptions to professional journals MA correspondence study course following costs $40 (fee for speake). 525 pico malo Sean attended 11 MCA dinner weetings in 2016. Este MA (Management Institute of Americal was to elime bome Sean goes to the meetings from work and the The course on ways to improve safety measures and and accident Michelle Atwell is a board-certified doctor of the provides thesiology services at a number of hospitals and sugalement Kansas City area. Michelle is well respected by the with whom the works. She uses her home as her business address. She besede sale of workplace. Pro gn dictates notes to patient files, participates in condetener cala reunding upconteng compiles and sends patient bills. Because Michelle does not mantana pele area for exclusive business use she does not claim a tax deductice for bome office. Michelle's receipts from her practice during 2018 were 1185.000, 16.00 of which was for services performed in 2018. Not included in these unosia $17.500 she received in January 2020 for services rendered in December 2019 Michelle's professional activity code is 621011 Michelle had the following business expenses in 2019 In 350 340 ed Medical clothing leg. lab coats, surgical scrubs 52.200 Medical malpractice Insurance 9.500 State medical license fee Dues to professional organizations Subscriptions to professional Journals In addition, she drove the family Suburban (purchased on March 2, 2018) 2.900 miles in connection with her work. She vises the standard menge method for computing deductible vehide cols Texal mileage for de Sebulan 9.000 miles for the year. II 50 Sean's widowed mother Lucy, endured a number of dierent medical chal lenges in late 2018. On December 30, 2018, she suffered a massive roke and died in the hospital on January 16, 2019. Some of locy's medical expert were covered by Medicare, with the remainder being paid by the Anel on February 18, 2019. Sean paid $39,800 to the hospital 28,000 of hh was attributable to expenses incurred in 2018 At the same time, Sean abo puid te funeral cxpenses Of 516,000. Although Liny ved in her own home prior to the stroke. Sean and Michelle have properly claimed her as a dependent for the past few years As Lucy's sole heir. Sean inherited her home and its mises located at 22 SW Sena Dme. Topeka, KS 60000. The costs and takes moved are as follows APPENDIX PaceSetAnime--Comprehensive tax Broblemi Cost Basis FMV on 2/3/19 Lot $10.000 5 30.000 House 110.000 250,000 Fumihings 55,000 25.000 Because the home wis located in an attractive rental area, Scan decided to to sell Instead, he rented the property fully furnished on May 1, 2019 The of the lease executed on April 30) provide for the following a la $2.500 per month payable on the first of each month), laste able in advance, and damage deposit of $1.500. In total Sean from the tenants in 2019 for their use of the property. Besides de peec his expenses were as follows: Property taxes Insurance 3.900 Repairs 2.100 Real estate renters location service 4010 3480 For MACRS depreciation purposes. Sean plans to use the straight method with the mid-month convention to compute the deduction for the real and the 2009 declining-balance method with a half-year convention for personally While walking the family dogs in late July, Sean was struck by delivery van and seriously injured. After being hospitalized for a week he was released bruised and sore-but with no permanent injuries. The driver of the van wa arrested and ticketed by the police for reckless operation of a vehicle and was later prosecuted for drug use. To prevent adverse publicity related to a law the owner of the delivery service paid for Scan's medical expenses and sem him a check on August 16, 2019. for 390.000. The check was accompanied by a letter that stated. This $90,000 is a settlement for physical injuries sustined by Sean Arwell." Sean was represented in the negotiations with the delivery company by his brother, a practicing attorney. He did not curge the Atwells for his services 7 The Atwells had the following property transactions during 2019: . On May 5, the City Council condemned unimproved land owned by Sean for the construction of a fire station. He purchased the land (two vacant lots 3100 and 3102 Sycamore Lane) as an investment on May 25, 2012. for $11.000 In exchange for the lols, the city gave Sean a large unimproved lot at 14 Genoa Street that was valued at $20,000. All in all, he was satisfied with the exchange because the Genoa Street property is in a better neighborhood und has a greater potential for appreciation b. On August 22. Sean sold a gun collection for $32,000 to an avid collector. The collection was a gift from Sean's father on December 25, 2014, when it was worth $22,000. His father bought the collection in 1997 for $14.000. Scansak of the collection was documented by a bill of sale, signed by both Sean and the buyer con September 9, the Arwells sold 3.000 shares of Dove Pharmaceuticals for $2,000. The couple purchased the stock on December 4, 2018, for $25,000. The investment was motivated by the rumor that Dove was developing a new drug for infertility. On September 7, the FDA announced that it would not approve the drug due to adverse side effects, and the Dove stock price plummeted The Arwell broker provided them with a Form 1099-B, which reported the gross proceeds from the sale and their basis in the stock. APPENDIX Comm, is. Tufts non Code of the M erms e pay The Arwells have a long term copia lo carry net 150 In March 2019, the Atwells were det for a year 2016 and 2017. The poco return However, the Awes were ad 2.250 and paid the $2,250 immediately (no interest or penalties were used the New During 2019, Scan served on a pu account bursed parking expenses of con cordone courthouse. As it result of the service, wisuda remitted the $700 of jury duty fees to VDES In addition to the items already noted the sells de los Ufe insurance proceeds 2018 Missouri state income tax refund proceeds from garage sale Interest income Kansas City general purpose bonds GiBank certificate of deposit 5.000 2019 acate line alty 19 Ppic par the Lucy's life insurance policy. At the garage sale, the Awesodperc can - The insurance proceeds were paid to Sean as the designed leader les camper, furniture, hurting and thine engagement that helped to com father and mother Ge. Lucy) Sean and Michelle edemated the best originally cost $7.100. The sole proceeds were donated to the Autemen Research Association (EIN 23-7138025) in memory Seander 2 The Atwells had the following additional expenditures 2018 35 tit ent by "ry or Dental bills not covered by Insurance Ad valorem property taxes on personal residence 110 Interest on home mortgage reported on Form 1 2.600 Contributions to Metropolitan Lutheran Ministry DIN 43-9709911 21600 As part of a program sponsored by their church a qualified cluente Atwells used the family Suburban to transport senior citizens to religioosser vices for a total of 900 miles during 2019, The Suburbano was used for numerous visits to an orthodontist for the Arwells dilden for of 180 miles 3 The Arwells' household includes two dependent children than (15) and Bella (age 10), both of whom are full-time students in high school Relevans Social Security numbers appear below or 0 d Name S Social Security Number 121-43-6758 12345678 123-45678 123456788 12345678 Sean B. Atwell Michelle R. Atwell Lucy E. Atwell Ethan M. Atwell Bella A. Atwell 14. Sean's Form W-2 from HMT Pharmaceuticals fit income tax withing of $6,500 for Federal income taxes and for state of Missour income taxes The Arnells made quarterly income tax payments Docling 5.000 for their Federal taxes and touring 320,000 for their states They their Federal income tax refund of $3.000 (for 2018) applied for their 2019 income tax d 13 PENDIX E Practice Set Assignments --Comprehensive Tax Return Problems Requirements Prepare an income tax return (with all appropriate forms and schedules) for the Atwells for 2019, using the following guidelines: The Atwells choose to file a joint income tax return. The Atwells do not wish to contribute to the Presidential Election Campaign Fund The Atwells do not own any foreign bank accounts or other investments. In addi- tion, the Atwells do not have any financial interests in virtual currencies. The Atwells prefer to receive a refund of any overpaid taxes. The taxpayers are preparing their own return i.e. no preparer is involved). For the past several years, the Atwells have itemized their deductions from AGI instead of using the standard deduction. In addition, the Atwells have deducted state income taxes (not sales taxes) for the past several years, The taxpayers have the necessary substantiation (e.g., records, receipts) to support all transactions reported on their tax return Make necessary assumptions for information not given in the problem but needed to complete the return PROBLEM 2-INDIVIDUALS (FORM 1040) Sean B. (age 42) and Michelle R. (age 48) Atwell are married and live at 5944 Overhill Road, Mission Hills, MO 66208 (a suburb of Kansas City), Sean is employed as a chemist by HMT Pharmaceuticals, Inc., and Michelle is a self-employed doctor of anesthesiology They are calendar year, cash basis taxpayers. 1. HMT Pharmaceuticals develops and produces injectable medicines used in chem- otherapy treatments for cancer patients. Sean manages the Kansas City facility for an annual salary of $95.000. HMT makes contributions to a qualified defined contribution pension plan for all of its full-time employees. Although Sean also has the opportunity to make contributions to the plan, he chose not to do so in 2019. Sean participates in his employer's group health insurance plan to which he contributed $4,000 in 2019 for medical coverage. These contributions are made with pretax dollars, so his taxable salary is reduced to $91,000 for W-2 reporting AVVENDIX Comm. is. Tufts Code of kolas ented from com- es following for lanner deral The health plan CONCES Scan, Miche, den Cerce. An additional $18) Lesbobedi HM provides all of its employees who the risk associated wh Sean's was the cable value of this insurance HMT generally reimburses Ses for expert company. However, as a matter of policy. W dnes to where Monthly dinner meetings of the Midwesten Cheras Dues to professional organizations Subscriptions to professional journals MA correspondence study course following costs $40 (fee for speake). 525 pico malo Sean attended 11 MCA dinner weetings in 2016. Este MA (Management Institute of Americal was to elime bome Sean goes to the meetings from work and the The course on ways to improve safety measures and and accident Michelle Atwell is a board-certified doctor of the provides thesiology services at a number of hospitals and sugalement Kansas City area. Michelle is well respected by the with whom the works. She uses her home as her business address. She besede sale of workplace. Pro gn dictates notes to patient files, participates in condetener cala reunding upconteng compiles and sends patient bills. Because Michelle does not mantana pele area for exclusive business use she does not claim a tax deductice for bome office. Michelle's receipts from her practice during 2018 were 1185.000, 16.00 of which was for services performed in 2018. Not included in these unosia $17.500 she received in January 2020 for services rendered in December 2019 Michelle's professional activity code is 621011 Michelle had the following business expenses in 2019 In 350 340 ed Medical clothing leg. lab coats, surgical scrubs 52.200 Medical malpractice Insurance 9.500 State medical license fee Dues to professional organizations Subscriptions to professional Journals In addition, she drove the family Suburban (purchased on March 2, 2018) 2.900 miles in connection with her work. She vises the standard menge method for computing deductible vehide cols Texal mileage for de Sebulan 9.000 miles for the year. II 50 Sean's widowed mother Lucy, endured a number of dierent medical chal lenges in late 2018. On December 30, 2018, she suffered a massive roke and died in the hospital on January 16, 2019. Some of locy's medical expert were covered by Medicare, with the remainder being paid by the Anel on February 18, 2019. Sean paid $39,800 to the hospital 28,000 of hh was attributable to expenses incurred in 2018 At the same time, Sean abo puid te funeral cxpenses Of 516,000. Although Liny ved in her own home prior to the stroke. Sean and Michelle have properly claimed her as a dependent for the past few years As Lucy's sole heir. Sean inherited her home and its mises located at 22 SW Sena Dme. Topeka, KS 60000. The costs and takes moved are as follows APPENDIX PaceSetAnime--Comprehensive tax Broblemi Cost Basis FMV on 2/3/19 Lot $10.000 5 30.000 House 110.000 250,000 Fumihings 55,000 25.000 Because the home wis located in an attractive rental area, Scan decided to to sell Instead, he rented the property fully furnished on May 1, 2019 The of the lease executed on April 30) provide for the following a la $2.500 per month payable on the first of each month), laste able in advance, and damage deposit of $1.500. In total Sean from the tenants in 2019 for their use of the property. Besides de peec his expenses were as follows: Property taxes Insurance 3.900 Repairs 2.100 Real estate renters location service 4010 3480 For MACRS depreciation purposes. Sean plans to use the straight method with the mid-month convention to compute the deduction for the real and the 2009 declining-balance method with a half-year convention for personally While walking the family dogs in late July, Sean was struck by delivery van and seriously injured. After being hospitalized for a week he was released bruised and sore-but with no permanent injuries. The driver of the van wa arrested and ticketed by the police for reckless operation of a vehicle and was later prosecuted for drug use. To prevent adverse publicity related to a law the owner of the delivery service paid for Scan's medical expenses and sem him a check on August 16, 2019. for 390.000. The check was accompanied by a letter that stated. This $90,000 is a settlement for physical injuries sustined by Sean Arwell." Sean was represented in the negotiations with the delivery company by his brother, a practicing attorney. He did not curge the Atwells for his services 7 The Atwells had the following property transactions during 2019: . On May 5, the City Council condemned unimproved land owned by Sean for the construction of a fire station. He purchased the land (two vacant lots 3100 and 3102 Sycamore Lane) as an investment on May 25, 2012. for $11.000 In exchange for the lols, the city gave Sean a large unimproved lot at 14 Genoa Street that was valued at $20,000. All in all, he was satisfied with the exchange because the Genoa Street property is in a better neighborhood und has a greater potential for appreciation b. On August 22. Sean sold a gun collection for $32,000 to an avid collector. The collection was a gift from Sean's father on December 25, 2014, when it was worth $22,000. His father bought the collection in 1997 for $14.000. Scansak of the collection was documented by a bill of sale, signed by both Sean and the buyer con September 9, the Arwells sold 3.000 shares of Dove Pharmaceuticals for $2,000. The couple purchased the stock on December 4, 2018, for $25,000. The investment was motivated by the rumor that Dove was developing a new drug for infertility. On September 7, the FDA announced that it would not approve the drug due to adverse side effects, and the Dove stock price plummeted The Arwell broker provided them with a Form 1099-B, which reported the gross proceeds from the sale and their basis in the stock. APPENDIX Comm, is. Tufts non Code of the M erms e pay The Arwells have a long term copia lo carry net 150 In March 2019, the Atwells were det for a year 2016 and 2017. The poco return However, the Awes were ad 2.250 and paid the $2,250 immediately (no interest or penalties were used the New During 2019, Scan served on a pu account bursed parking expenses of con cordone courthouse. As it result of the service, wisuda remitted the $700 of jury duty fees to VDES In addition to the items already noted the sells de los Ufe insurance proceeds 2018 Missouri state income tax refund proceeds from garage sale Interest income Kansas City general purpose bonds GiBank certificate of deposit 5.000 2019 acate line alty 19 Ppic par the Lucy's life insurance policy. At the garage sale, the Awesodperc can - The insurance proceeds were paid to Sean as the designed leader les camper, furniture, hurting and thine engagement that helped to com father and mother Ge. Lucy) Sean and Michelle edemated the best originally cost $7.100. The sole proceeds were donated to the Autemen Research Association (EIN 23-7138025) in memory Seander 2 The Atwells had the following additional expenditures 2018 35 tit ent by "ry or Dental bills not covered by Insurance Ad valorem property taxes on personal residence 110 Interest on home mortgage reported on Form 1 2.600 Contributions to Metropolitan Lutheran Ministry DIN 43-9709911 21600 As part of a program sponsored by their church a qualified cluente Atwells used the family Suburban to transport senior citizens to religioosser vices for a total of 900 miles during 2019, The Suburbano was used for numerous visits to an orthodontist for the Arwells dilden for of 180 miles 3 The Arwells' household includes two dependent children than (15) and Bella (age 10), both of whom are full-time students in high school Relevans Social Security numbers appear below or 0 d Name S Social Security Number 121-43-6758 12345678 123-45678 123456788 12345678 Sean B. Atwell Michelle R. Atwell Lucy E. Atwell Ethan M. Atwell Bella A. Atwell 14. Sean's Form W-2 from HMT Pharmaceuticals fit income tax withing of $6,500 for Federal income taxes and for state of Missour income taxes The Arnells made quarterly income tax payments Docling 5.000 for their Federal taxes and touring 320,000 for their states They their Federal income tax refund of $3.000 (for 2018) applied for their 2019 income tax d 13 PENDIX E Practice Set Assignments --Comprehensive Tax Return Problems Requirements Prepare an income tax return (with all appropriate forms and schedules) for the Atwells for 2019, using the following guidelines: The Atwells choose to file a joint income tax return. The Atwells do not wish to contribute to the Presidential Election Campaign Fund The Atwells do not own any foreign bank accounts or other investments. In addi- tion, the Atwells do not have any financial interests in virtual currencies. The Atwells prefer to receive a refund of any overpaid taxes. The taxpayers are preparing their own return i.e. no preparer is involved). For the past several years, the Atwells have itemized their deductions from AGI instead of using the standard deduction. In addition, the Atwells have deducted state income taxes (not sales taxes) for the past several years, The taxpayers have the necessary substantiation (e.g., records, receipts) to support all transactions reported on their tax return Make necessary assumptions for information not given in the problem but needed to complete the return