Section 1 Louis and Sandy Roman were married with two children Eddie age 13 and Nancy age 20. On July 7 2011 Louis died. Nancy is a full-time student at the state university. The Romans own their home and live in Denver. Louis had been disabled since 2005. Sandy is an insurance adjuster and sings in her church choir. I. Select the filing status that is most appropriate for Sandy Roman for the 2011 tax year. A. Married filing jointly B. Married filing separately C. Qualifying Widow(er) D. Single E. Head of household II. Sandy and Louis Roman filed a joint income tax return for 2010. For each of the items or events listed below, indicate which are includible in gross income by checking the boxes next to those that are includible. Includible in gross income 1. Sandy received a payment of $60,000 as the beneficiary of her father?s life insurance policy. 2. In 2010, the State of California issued an income tax refund of $900 for the tax year 2009. Louis and Sandy did not itemize for 2009, but did itemize for 2010. 3. Louis received a $650 dividend from a mutual fund that listed its source as 100% various European companies. 4. Eddie received a $600 dividend from a fund he owned under the state?s Gifts To Minors Act. He will not file separately, and this is his only income for the year 5. Sandy received a $450 dividend from stock she owned in joint tenancy with Louis. 6. Louis sold 20 shares of common stock at a gain of $4,000. 7. Sandy won a raffle and collected $2,000 in cash. 8. Sandy received $200 for serving as a juror in a state court proceeding. III. Using the following table, characterize each of the following items or events as Deductible for Adjusted Gross Income (AGI), Deductible from AGI, or Nondeductible for tax year 2010 by checking the appropriate box next to each item. Disregard any AGI limitations. Be sure a box is selected for each of the items or events. Deductible for AGI Deductible from AGI Not deductible Sandy made a $1,800 ROTH IRA contribution. Repair costs of $1,500 to replace part of the bathroom floor that had rotted due to moisture. (Not a casualty) Medical insurance premiums of $820 deducted from Louis?s disability checks Over-the-counter cold remedies totaling $450 used by the family. Homeowner?s insurance of $540 paid on the family home.(Personal) Life insurance premiums of $750 for Louis. (Personal) Alimony payments made by Louis to a former spouse. Sales tax of $1,200 paid on the purchase of a family car during the year Interest expense of $600 paid on Sandy?s margin balance in her brokerage account. IV. Assume for the purposes of the following question that Louis was still alive at the end of year 2011. For the 2011 tax year, the Roman family had various items of income and expenditures, as listed below. Determine either the amount of income, or the adjustment to income, that should be included or deducted on the Romans? Form 1040 - Individual Income Tax Return, to arrive at adjusted gross income. Insert the appropriate items of income in the shaded cells (line 7 through 21) and the appropriate adjustments to income in the shaded cells (lines 23 through 35). The total of items of income and adjustments to income need to be calculated on lines 22 and 36, respectively. Adjusted gross income need to be calculated on line 37. The Romans received a $200 state income tax refund of the prior year?s tax. The Romans had deducted $2,000 of state income taxes in the prior year, all of which resulted in federal tax savings. The Romans received a $1,000 federal tax refund of the prior year?s tax. The Romans had paid $4,000 of federal income tax in the prior year. Louis received $5,000 of qualified cash dividends from a corporation listed on the New York stock exchange; and received $500 of interest from a bank savings account. Sandy received $4,000 of tax-exempt interest. Sandy?s federal taxable wages reported on Form W-2 amounted to $50,000. Sandy contributed $3,000 to a traditional IRA account. Louis paid a $25 penalty on a premature withdrawal of a certificate of deposit. Sandy paid $500 of self-employment tax on her choir net income. Sandy is the sole owner of rental real estate on which current-year income exceeded expenses by $6,000 as reported on Schedule E. The Romans had no other income on losses from passive activities. Sandy actively participates in managing the property. The Romans paid $6,500 of real estate taxes on their personal residence. Eddie and Nancy each received a $5,000 gift from their wealthy uncle. V. Your client received the following notice from the Internal Revenue Service and sent it to you, asking for your assistance. As your client?s CPA, write a letter to your client explaining the significance of the notice and telling them what information you need to respond to the IRS. Department of the Treasury Date of Notice: Sept. 9, 2011 Internal Revenue Service Form: 1040 Tax Period: Dec. 31, 2010 Louis and Sandy Roman 123 Spruce Street Anytown, USA NOTICE OF LATE FILING AND PAYMENT OF TAXES YOU HAVE AN AMOUNT DUE REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. (Length 150?300 words) Memorandum To: Mr. & Mrs. Roman Subject: "Notice of Late Filing and Payment of Taxes" Notice Section 2 Trevor and Jordan Riley were married during the year 2010. Late in 2010 their daughter Sydney was born. Jordan had previously been married and has sole custody of her daughter Kristi Turner age 12. Prior to her marriage to Trevor Jordan received 5000 in alimony and 12600 in child support during 2010. Trevor's mother Linda who was fully supported by Trevor during 2010 lived in a retirement community for the entire year. The Rileys wish to minimize their tax liability. Following is additional information pertaining to the Riley family for 2010: 1. During 2010 the Rileys earned 10000 in ordinary interest and 8500 in municipal bond interest. 2. Trevor's 2010 wages were 85000 and Jordan's were 60000. In addition Trevor's employer provided group term life insurance on Trevor's life in excess of 50000. The value of such excess coverage was 2000. The Rileys received a 2000 security deposit on the rental property they actively manage in 2010. They are required to return the amount to the tenant. Also the Rileys received 20000 in gross receipts from their rental property in 2010. The expenses for the residential rental property were: Bank mortgage interest 12000 Real estate taxes 3600 Insurance 1700 MACRS Depreciation 4200 4. In 2009 Trevor's father passed away and in 2010 Trevor received 4000 as the beneficiary of the death benefit which was provided by his father's employer. Trevor's father did not have a non-forfeitable right to receive the money while living. 5. In early January 2010 as part of a sweepstakes contest Jordan won a week's stay valued at 3000 at a luxurious hotel in Hawaii. Trevor and Jordan spent their honeymoon at that hotel. 6. The Rileys had no capital loss carryovers from prior years. During 2010 the Rileys had the following stock transactions: Stock Purchased Sold Adjusted Basis Selling Price A 8/29/82 1/7/10 $6,000 $10,800 B 6/28/89 8/25/10 4,200 400 C 1/14/10 7/14/10 8,000 5,500 D 2/18/10 12/20/10 6,000 4,000 I .Form 1040 Enter the appropriate values in the following 1040 tax form below: II. For each of the items of income below, identify the taxability by selecting of the following options: Fully Taxable, Partially Taxable, Non-Taxable. Income Item 1. Fair market value of property received as wages 2. Cancellation of debt 3. Employer provided education reimbursement of $8,000 4. Interest received on state and local government bonds 5. Interest received from the federal government for late payment of tax refund 6. Distribution from a traditional non-deductible Individual Retirement Account (IRA) 7. Property received as a gift 8. $15,000 received as scholarship funds for a qualified degree-seeking student for the following: $10,000 tuition $2,000 books $3,000 room & board 9. Worker's compensation payments for sickness 10. $450,000 of proceeds from the sale of a personal residence by a qualified single individual whose basis was $150,000 II. In a brief communication to Trevor and Jordan Riley, explain the implications of the sale in 2011 of the gift of land from Jordan's grandmother. Jordan's grandmother?s basis of the land is $60,000. REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. (Length 150?300 words) Memorandum To: Mr. & Mrs. Trevor Riley Subject: Implications of the Sale in 2011 of the Gift of Land Section 3 Mrs. Belcher a widowed 40-year-old cash basis taxpayer earned 50000 as a teacher and 5000 as a part-time real estate agent in 2010. Mr. Belcher died on July 1 2010. The following information pertains to 2010 income and expenses for the Belchers. The Belchers' gross income for 2010 was 57000. This income consists of the following: Wages 50000 Income from self-employment 5000 Interest 1750 Gambling winnings 250 Following are expenses incurred by the Belcher family in 2010: Premiums on Mr. Belcher's personal life insurance policy 1200 Penalty on Mrs. Belcher's early withdrawal of funds from a certificate of deposit 250 Mrs. Belcher's substantiated cash donation to the American Red Cross 500 Payment of estimated state income taxes made (during 2010) 400 Withholding of state income taxes (during 2010) 700 Payment of real estate taxes on the Belcher home 2000 Loss on the sale of the family car 750 Cost in excess of the increase in value of residence related to the installation of a stairlift in January 2010 specifically for the medical care of Mr. Belcher 450 Health insurance premiums for hospitalization coverage (not related to self-employment activity not long-term and not paid pre-tax) 1000 CPA fees to prepare the 2009 tax return 250 Interest on the Belcher's home mortgage 5000 One-half the self-employment tax paid by Mrs. Belcher 353 Mrs. Belcher's gambling losses 100 Mrs. Belcher's union dues 100 2009 federal income tax paid with the Belcher's tax return on April 15 2010 250 I. Enter the appropriate values in the Schedule A tax form below. II. For each item in the list below, identify whether it is an adjustment to arrive at adjusted gross income (adjustment)---deductions for AGI, a deduction from adjusted gross income to arrive at taxable income (deduction)---deductions from AGI, or neither. 1. Premiums paid on personal life insurance policy 2. State income taxes paid or withheld 3. Loss on the sale of a personal auto 4. Health insurance premiums paid by an employee under an employer's plan (not pre-tax) 5. Fees paid for tax return preparation 6. Donations of cash or property to a qualified charity 7. Interest paid on home mortgage indebtedness of $250,000 8. Union dues not reimbursed by an employer 9. Federal income taxes paid or withheld 10. Employer portion of taxes paid on self-employment income 11. Contributions to a deductible individual retirement account (no phase-out applies) 12. Penalty for early withdrawal of funds in a certificate of deposit III. For each item in the list below, identify whether it is adjustments or preferences in calculating individual alternative minimum taxable income (AMTI). 1. Difference between percentage of completion and the completed contract method of accounting for long-term construction contracts 2. Personal exemptions 3. Standard deduction 4. Qualified moving expenses 5. Deductible contributions to an individual retirement account 6. Private activity bond tax-exempt interest 7. Dividends received 8. Gambling losses deducted up to gambling winnings 9. Medical expenses that exceed 7.5% AGI and are less than 10% of AGI 10. 50% self-employment tax paid (employer portion) 11. Mortgage interest paid on less than $1,000,000 acquisition indebtedness on a principal residence 12. Interest paid on a home equity loan where the proceeds are used to buy a car The basic calculation to arrive at an individual's alternative minimum taxable income (AMTI) is: Regular taxable income Adjustments + Preferences Alternative Minimum Taxable Income IV. While preparing the Belcher's 2010 tax return, you have received a request from the court presiding over Mr. Belcher's estate proceedings for information relating to the Belcher's 2010 tax return. In a memorandum to the file, please discuss the allowable circumstances under which a tax preparer can disclose a taxpayer's information, and whether or not this situation qualifies.

Group Project (20 extra points) Requirements for Group Project Each group must have at least three people but no more than five. This project incorporates three sections. Due date: Wednesday November 23, 2011. Section 1 Louis and Sandy Roman were married with two children Eddie age 13 and Nancy age 20. On July 7 2011 Louis died. Nancy is a full-time student at the state university. The Romans own their home and live in Denver. Louis had been disabled since 2005. Sandy is an insurance adjuster and sings in her church choir. I. Select the filing status that is most appropriate for Sandy Roman for the 2011 tax year. A. Married filing jointly B. Married filing separately C. Qualifying Widow(er) D. Single E. Head of household II. Sandy and Louis Roman filed a joint income tax return for 2010. For each of the items or events listed below, indicate which are includible in gross income by checking the boxes next to those that are includible. Includibl e in gross income 1. Sandy received a payment of $60,000 as the beneficiary of her father's life insurance policy. 2. In 2010, the State of California issued an income tax refund of $900 for the tax year 2009. Louis and Sandy did not itemize for 2009, but did itemize for 2010. 3. Louis received a $650 dividend from a mutual fund that listed its source as 100% various European companies. 4. Eddie received a $600 dividend from a fund he owned under the state's Gifts To Minors Act. He will not file separately, and this is his only income for the year 5. Sandy received a $450 dividend from stock she owned in joint tenancy with Louis. 6. Louis sold 20 shares of common stock at a gain of $4,000. 7. Sandy won a raffle and collected $2,000 in cash. 8. Sandy received $200 for serving as a juror in a state court proceeding. III. Using the following table, characterize each of the following items or events as Deductible for Adjusted Gross Income (AGI), Deductible from AGI, or Nondeductible for tax year 2010 by checking the appropriate box next to each item. Disregard any AGI limitations. Be sure a box is selected for each of the items or events. Deductible for AGI Deductible from AGI Not deductible Sandy made a $1,800 ROTH IRA contribution. Repair costs of $1,500 to replace part of the bathroom floor that had rotted due to moisture. (Not a casualty) Medical insurance premiums of $820 deducted from Louis's disability checks Over-the-counter cold remedies totaling $450 used by the family. Homeowner's insurance of $540 paid on the family home.(Personal) Life insurance premiums of $750 for Louis. (Personal) Alimony payments made by Louis to a former spouse. Sales tax of $1,200 paid on the purchase of a family car during the year Interest expense of $600 paid on Sandy's margin balance in her brokerage account. IV. Assume for the purposes of the following question that Louis was still alive at the end of year 2011. For the 2011 tax year, the Roman family had various items of income and expenditures, as listed below. Determine either the amount of income, or the adjustment to income, that should be included or deducted on the Romans' Form 1040 Individual Income Tax Return, to arrive at adjusted gross income. Insert the appropriate items of income in the shaded cells (line 7 through 21) and the appropriate adjustments to income in the shaded cells (lines 23 through 35). The total of items of income and adjustments to income need to be calculated on lines 22 and 36, respectively. Adjusted gross income need to be calculated on line 37. The Romans received a $200 state income tax refund of the prior year's tax. The Romans had deducted $2,000 of state income taxes in the prior year, all of which resulted in federal tax savings. The Romans received a $1,000 federal tax refund of the prior year's tax. The Romans had paid $4,000 of federal income tax in the prior year. Louis received $5,000 of qualified cash dividends from a corporation listed on the New York stock exchange; and received $500 of interest from a bank savings account. Sandy received $4,000 of tax-exempt interest. Sandy's federal taxable wages reported on Form W-2 amounted to $50,000. Sandy contributed $3,000 to a traditional IRA account. Louis paid a $25 penalty on a premature withdrawal of a certificate of deposit. Sandy paid $500 of self-employment tax on her choir net income. Sandy is the sole owner of rental real estate on which current-year income exceeded expenses by $6,000 as reported on Schedule E. The Romans had no other income on losses from passive activities. Sandy actively participates in managing the property. The Romans paid $6,500 of real estate taxes on their personal residence. Eddie and Nancy each received a $5,000 gift from their wealthy uncle. V. Your client received the following notice from the Internal Revenue Service and sent it to you, asking for your assistance. As your client's CPA, write a letter to your client explaining the significance of the notice and telling them what information you need to respond to the IRS. Department of the Treasury Sept. 9, 2011 Internal Revenue Service Period: Dec. 31, 2010 Date of Notice: Form: 1040 Tax Louis and Sandy Roman 123 Spruce Street Anytown, USA NOTICE OF LATE FILING AND PAYMENT OF TAXES YOU HAVE AN AMOUNT DUE Our records indicate that your 2010 return and the accompanying income tax payment were received late. As a result, we have assessed late filing and late payment of tax penalties in the amount of $1,000. Payment is due October 15, 2011. Additional interest and penalties will accrue if payment is not received by this date. If you think we made a mistake, please reply to this letter no later than September 30, 2011. REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. (Length 150300 words) Memorandum To: Mr. & Mrs. Roman Subject: "Notice of Late Filing and Payment of Taxes" Notice Section 2 Trevor and Jordan Riley were married during the year 2010. Late in 2010 their daughter Sydney was born. Jordan had previously been married and has sole custody of her daughter Kristi Turner age 12. Prior to her marriage to Trevor Jordan received 5000 in alimony and 12600 in child support during 2010. Trevor's mother Linda who was fully supported by Trevor during 2010 lived in a retirement community for the entire year. The Rileys wish to minimize their tax liability. Following is additional information pertaining to the Riley family for 2010: 1. During 2010 the Rileys earned 10000 in ordinary interest and 8500 in municipal bond interest. 2. Trevor's 2010 wages were 85000 and Jordan's were 60000. In addition Trevor's employer provided group term life insurance on Trevor's life in excess of 50000. The value of such excess coverage was 2000. The Rileys received a 2000 security deposit on the rental property they actively manage in 2010. They are required to return the amount to the tenant. Also the Rileys received 20000 in gross receipts from their rental property in 2010. The expenses for the residential rental property were: Bank mortgage interest 12000 Real estate taxes 3600 Insurance 1700 MACRS Depreciation 4200 4. In 2009 Trevor's father passed away and in 2010 Trevor received 4000 as the beneficiary of the death benefit which was provided by his father's employer. Trevor's father did not have a non-forfeitable right to receive the money while living. 5. In early January 2010 as part of a sweepstakes contest Jordan won a week's stay valued at 3000 at a luxurious hotel in Hawaii. Trevor and Jordan spent their honeymoon at that hotel. 6. The Rileys had no capital loss carryovers from prior years. During 2010 the Rileys had the following stock transactions: Sto ck A B Purchase d 8/29/82 6/28/89 C 1/14/10 D 2/18/10 Sold 1/7/10 8/25/1 0 7/14/1 0 12/20/ 10 Adjusted Basis $6,000 4,200 Selling Price $10,800 400 8,000 5,500 6,000 4,000 I .Form 1040 Enter the appropriate values in the following 1040 tax form below: II. For each of the items of income below, identify the taxability by selecting of the following options: Fully Taxable, Partially Taxable, NonTaxable. Income Item 1. Fair market value of property received as wages 2. Cancellation of debt 3. Employer provided education reimbursement of $8,000 4. Interest received on state and local government bonds 5. Interest received from the federal government for late payment of tax refund 6. Distribution from a traditional non-deductible Individual Retirement Account (IRA) 7. Property received as a gift 8. $15,000 received as scholarship funds for a qualified degree-seeking student for the following: $10,000 tuition $2,000 books $3,000 room & board 9. Worker's compensation payments for sickness 10. $450,000 of proceeds from the sale of a personal residence by a qualified single individual whose basis was $150,000 II. In a brief communication to Trevor and Jordan Riley, explain the implications of the sale in 2011 of the gift of land from Jordan's grandmother. Jordan's grandmother's basis of the land is $60,000. REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. (Length 150300 words) To: Subject: Memorandum Mr. & Mrs. Trevor Riley Implications of the Sale in 2011 of the Gift of Land Section 3 Mrs. Belcher a widowed 40-year-old cash basis taxpayer earned 50000 as a teacher and 5000 as a part-time real estate agent in 2010. Mr. Belcher died on July 1 2010. The following information pertains to 2010 income and expenses for the Belchers. The Belchers' gross income for 2010 was 57000. This income consists of the following: Wages 50000 Income from self-employment Interest Gambling winnings 5000 1750 250 Following are expenses incurred by the Belcher family in 2010: Premiums on Mr. Belcher's personal life insurance policy 1200 Penalty on Mrs. Belcher's early withdrawal of funds from a certificate of deposit 250 Mrs. Belcher's substantiated cash donation to the American Red Cross 500 Payment of estimated state income taxes made (during 2010) 400 Withholding of state income taxes (during 2010) 700 Payment of real estate taxes on the Belcher home 2000 Loss on the sale of the family car 750 Cost in excess of the increase in value of residence related to the installation of a stairlift in January 2010 specifically for the medical care of Mr. Belcher 450 Health insurance premiums for hospitalization coverage (not related to self-employment activity not long-term and not paid pre-tax) 1000 CPA fees to prepare the 2009 tax return 250 Interest on the Belcher's home mortgage 5000 One-half the self-employment tax paid by Mrs. Belcher 353 Mrs. Belcher's gambling losses 100 Mrs. Belcher's union dues 100 2009 federal income tax paid with the Belcher's tax return on April 15 2010 250 I. Enter the appropriate values in the Schedule A tax form below. II. For each item in the list below, identify whether it is an adjustment to arrive at adjusted gross income (adjustment)deductions for AGI, a deduction from adjusted gross income to arrive at taxable income (deduction)deductions from AGI, or neither. 1. Premiums paid on personal life insurance policy 2. State income taxes paid or withheld 3. Loss on the sale of a personal auto 4. Health insurance premiums paid by an employee under an employer's plan (not pretax) 5. Fees paid for tax return preparation 6. Donations of cash or property to a qualified charity 7. Interest paid on home mortgage indebtedness of $250,000 8. Union dues not reimbursed by an employer 9. Federal income taxes paid or withheld 10. Employer portion of taxes paid on self-employment income 11. Contributions to a deductible individual retirement account (no phase-out applies) 12. Penalty for early withdrawal of funds in a certificate of deposit III. For each item in the list below, identify whether it is adjustments or preferences in calculating individual alternative minimum taxable income (AMTI). 1. Difference between percentage of completion and the completed contract method of accounting for longterm construction contracts 2. Personal exemptions 3. Standard deduction 4. Qualified moving expenses 5. Deductible contributions to an individual retirement account 6. Private activity bond taxexempt interest 7. Dividends received 8. Gambling losses deducted up to gambling winnings 9. Medical expenses that exceed 7.5% AGI and are less than 10% of AGI 10. 50% selfemployment tax paid (employer portion) 11. Mortgage interest paid on less than $1,000,000 acquisition indebtedness on a principal residence 12. Interest paid on a home equity loan where the proceeds are used to buy a car The basic calculation to arrive at an individual's alternative minimum taxable income (AMTI) is: Regular taxable income Adjustments + Preferences Alternative Minimum Taxable Income IV. While preparing the Belcher's 2010 tax return, you have received a request from the court presiding over Mr. Belcher's estate proceedings for information relating to the Belcher's 2010 tax return. In a memorandum to the file, please discuss the allowable circumstances under which a tax preparer can disclose a taxpayer's information, and whether or not this situation qualifies. REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. Memorandum To: File Subject: Acceptable Disclosure of Taxpayer Information