Tax Return Facts: Martin I. and Paola A. Gonzalez are married and live at 12485 SW 116 Place, Miami, FL 33186. They file a joint return and are calendar year, cash basis taxpayers. 1. Martin is a self-employed architect (professional activity code is 542311). He maintains an office at 12785 SW 120 Street, Miami, FL 33186. All of the following expenses paid in 2019 below are business related: Office rent (prepaid 14 months on 6/1/2019) $16,000 Utilities 2,400 Office expenses (supplies, etc.) 5,800 Contributions to Republican political campaign 300 Tolls (business related) 550 Parking expense (business related) 250 State and local license fees 600 Renters insurance (prepaid 12 months on 6/1/2019) 1,800 New drafting equipment acquired on 6/15/2019 5,000 Advertising 2,500 Meals 2,400 Entertainment (tickets to sporting events and concerts) 3,000

As is the case with all of Martins business transactions, the meals and entertainment expenses are properly documented and supported by receipts. The meals and entertainment expense relates to taking clients out to eat and discussing business during the meals and the meals were immediately followed by taking clients to a sporting event or concert. Of 19,000 total miles driven in 2019, Martin drove his car (a 2015 Ford Explorer purchased on 8/1/2015) 10,500 miles for business (not including commuting). Martin uses the automatic mileage method of claiming automobile expenses. Martin began his drafting business in March 2018. In starting his business Martin incurred the following items: Office furniture acquired on 3/1/18 4,000 iMac with 27 monitor acquired on 3/1/18 2,000 Drafting equipment acquired on 10/1/18 6,000 Martin elected not to claim bonus depreciation or Sec 179 on property acquisitions in 2018. On 6/15/19 Martin disposed of the drafting equipment acquired in 2018 for $4,500 and replaced it with new equipment as shown in 2019 expenses in previous page above (Note: This is not a like kind exchange). Martin elected not to claim bonus depreciation or Sec 179 for the 2019 drafting equipment purchase. 2. Paola works as a sales executive for Avis rental cars. She receives several fringe benefits including group health insurance for her family. She purchased a new Mercedes from Avis for $40,000 when the FMV was $55,000. The purchase cost for Avis was $40,000. Avis's average gross profit percentage is 25%. Paolas company offers free group term life insurance for all their employees. Paola received $500,000 in life insurance coverage in 2019. Paola drives to various sales meetings away from her primary place of work totaling 7,000 business related miles. The remainder of her 18,000 miles driven were commuting or personal. Paola was not reimbursed for these mileage expenses and like her husband she plans to use the standard mileage deduction, if expense is deductible. 3. On October 1, 2015 the Gonzalezs purchased a house in Augusta, GA located on the National Golf Club of Augusta, home of the Masters Golf Championship. The house is held as a rental investment. The property cost $800,000 (of which $400,000 is allocated to the land) and is located at 1606 Jack Nicklaus Way, Augusta, GA 30904. The Gonzalez family rented the house out for all of 2019. $40,000 in gross rental receipts was collected in 2019 which included $3,500 that was received in advance for 2020. They use MACRS straight-line depreciation, assuming the mid-month convention. The Gonzalezs pay a rental management company to handle all aspects of renting and care of this property. Information regarding the rental property items for 2019 are summarized below: Refundable damage deposit 4,000 Property taxes 9,800 Interest on mortgage 14,500 Repairs 4,800 Insurance 2,500 Utilities 3,000 Management fees (paid to rental management company) 8,800 4. Martin bought 400 shares of Apple stock on January 1, 2015 for $200 per share with a brokerage fee of $1,000. Martin sold 100 shares for $140 per share on November 12, 2019. Martin then purchased 100 shares of the same type of Apple stock on December 10, 2019 for $138 share. No brokerage fee was incurred on the 2019 transactions. Paola had the following stock sales in 2019: Date Purchased Basis Date Sold Amount Realized Stock 1 3/16/1997 $7,850 7/22/2019 $6,500 Stock 2 2/12/2019 15,000 9/13/2019 19,500 Stock 3 6/25/2012 11,750 10/12/2019 15,600 Stock 4 7/19/2018 8,250 1/12/2019 12,800 Stock 5 9/18/2006 9,400 11/26/2019 4,500 5. Besides those previously noted, the Gonzalezs had the following receipts for 2019: Drafting fees received for services $90,000 Paolas W-2 wages (see information below) $80,000 Qualified dividends from Dell Corporation $7,500 Boat (see information below) Income tax refunds for tax year 2019 Federal tax $6,400 Miami Dade Property tax 7,800 $14,200 Interest income-- Wells Fargo Bank $400 Miami Dade municipal bond 200 Annuity income (see information below) $5,000 Gambling income $2,400 Martin prepared a blueprint floorplan for a client in exchange for a used fishing boat. The blueprint floorplan fee normally would have been charged at $8,000 to the client. The clients fishing boat had a FMV of $7,500 and client had previously paid $10,000 for the boat. No cash was involved in this transaction. Paolas W-2 wage amount (above) includes $10,000 employer contribution to 401K defined contribution plan but does not include any amounts from Item 2. Paola purchased an annuity in 2015 and invested $60,000 and will receive $5,000 yearly over a 15 year period. Paola received a $5,000 annuity payment in December 2019. 6. In addition to any items previously noted, the Gonzalezs had the following itemized expenses for 2019: Medical and dental expenses not covered by Insurance $9,000 Real estate tax on personal residence 11,500 Interest Home mortgage $22,000 Investment interest 11,400 Charitable contributions (See information below) Gambling expenses (with proof of payment) 4,500 Of the $9,000 in medical expenses, $2,000 was used to pay for an urgent care clinic visit for Juan Gonzalez, Martins brother who is not a dependent. Juan was visiting Martin and injured his back playing a round of golf. $6,700 was used to cover copayments and uninsured medical and dental procedures for Paola and their children. The remaining $300 was for purchases of over the counter medications. On December 24, 2018 the Gonzalezs after saving their paychecks for years purchased their dream home as their primary residence for $650,000 and put down a $200,000 deposit and financed $450,000 with Wells Fargo Bank. The charitable contributions were all made to qualified charitable organizations as follows: $8,000 cash donated to their church; 7. The Gonzalezs household includes their three children: Joseph, age 20, Patty age 16, and Gianna, age 14. Patty and Gianna are full-time students and live fulltime at their home. Joseph lived at home all year and is attending FIU full time and he also works doing tile and pavement cleaning and earned $8,000 in 2019. The Gonzalezs provide more than half of each of the childrens living expenses. 8.Paolas Form W-2 from Avis shows $30,000 withheld for Federal income tax and $7,681 for state income tax. Martin made four equal quarterly payments of $4,000 (Federal) and $2,000 (state). All Social Security numbers are noted below. Social Security Name Number Martin A. Gonzalez 123-45-6789 Paola M. Gonzalez 123-45-6439 Joseph Gonzalez 123-45-6781 Patty Gonzalez 123-45-6782 Gianna Gonzalez 123-45-6783

REQUIREMENTS Prepare an income tax return by hand in blue pen (no tax software) with needed schedules that can be obtained from the IRS website (irs.gov) for the Gonzalezs for 2019 Tax Year. You will need to download applicable schedules for F1040 including schedules A-E, SE, and Form 4562 and perhaps a few other schedules. Attach an additional sheet/sheets to show calculations where applicable. In doing this, use the following guidelines: You may complete assignment individually or in groups up to 5 people. Place all participating student names on cover sheet. Make necessary assumptions for information not given in the problem but needed to complete the return. Be aware of the possible application of certain tax credits such as the child tax credit. The taxpayers have the necessary substantiation (e.g., records, receipts) to support the transactions involved. If a refund results, the taxpayers want it sent to them. Regarding possible credits, only consider the child tax credit. The Gonzalezs do not wish to contribute to the Presidential Election Campaign fund. In the past several years, the Gonzalezs have itemized their deductions from AGI (have not claimed the standard deduction option). In 2018 they claimed $26,600 in itemized expenses.

For Item 2 assume that Paola is 43 years old For Item 5 the federal tax and Miami Dade income tax refunds are received in 2019 and are related to the prior filed 2018 tax returns. The federal income tax refund is just an overpayment of federal taxes (i.e. TPs 2018 withholding and estimated tax payments exceeded taxes due so a refund was issued). The Miami Dade Property Tax refund is another matter, though, as that was deducted in 2018 as an itemized deduction as part of the $26,600 in total itemized deductions as given in last page of facts.