Tax Return Pro

ject

Due

December 4

th

Required:

Using the information provided, prepare the 2018 federal tax return for Cal and Evann Malec

.

The forms that need to be filled in

are as follows

:

o

Form

1040

o

Schedule

s

1, 3, 4,

and 5

o

Schedule

s

A, B, C,

D, and E

o

Form 8949,

Form 4562 (

2

-

one for DogWalker and one for rental) and Form 8863

o

Schedule SE (

2

-

One

for Cal and

one

For Evann)

o

Helpful workshe

ets from Form 1040 ins

truction

s

-

on

page 40, 37, 9

6, and 7

The return should be

prepared manually. You are not allowed to use return software. The tax

forms from the IRS allow typing, so you may complete the forms using typing or handwriting.

Please write legibly if you fill in the forms by hand. Any supplemental schedules or electi

on

statements that should be attached to the return may be typed.

The forms, schedules, and instructions can be found at the IRS website (

www.irs.gov

). The

instructions can be helpful in completing the return and identif

ying the appropriate tax forms.

Include the names of your group's members on the Return Summary Form.

Attach an excel spreadsheet showing the calculation of the tax.

Fill in the attached Return Summary Form and submit with the prepared return

(page 4

)

and

attach to the front of the tax return

.

Facts:

1)

Cal A. and Evann M. Malec are married and file a joint return. Cal is self

-

employed as a

professional dog walker and Evann is a college science professor. Cal and Evann have three

children. The oldest is Chas

e, who lives at home. Chase is a full

-

time nursing student at the

University of Nebraska and worked part time during the year earning $1,500, which he spent for

his own support. Cal and Evann provided $6,000 towards Chase support (including $4,000 for

fal

l tuition). They also provided over half the support of their daughter, Alexis, who is a full

-

time

student at the University of Nebraska. Alexis lived at home until she was married in December

of 201

8

. She filed a joint return with her husband, Darin, wh

o earned $

4

0,000 during the year.

Becky is the youngest and lived with Cal and Evann for the entire year. The Malecs provide you

with the following additional information:

The Malecs do not want to contribute to the presidential election campaign

The Ma

lecs live at 6910 NW 3

rd

Street Lincoln, Nebraska 68521

Cal's birthday is 8/15/1958 and his social security number is 444

-

56

-

7777

Evann's birthday is 12/16/1961 and her social security number is 655

-

77

-

8889

Chase's birthday is

5/28/199

6

and his social secu

rity number is 576

-

20

-

2879

Alexis's birthday is 5/1/199

8

and her social security number is 575

-

29

-

2143

Becky's birthday is 5/15/2004 and his social security number is 643

-

92

-

4685

The Malecs do not have a foreign bank account or trusts

2

2)

Evann is a

lecturer at the University of Nebraska

in Lincoln, where she earned $6

0,000. The

university w

ithheld federal income tax of $6,425, state income tax of $2,550, Social Security tax

of $3,720, and Medicare tax of $8

7

0

. She also worked part time for Spreetai

l. Spreetail paid her

$10,000 in salary, and withheld federal income tax of $1,124, state income tax of $425, Social

Security tax of $620, and Medicare tax of $145.

3)

The Malecs received $800 of interest from Wells Fargo on a joint account. They received

$900

interest on the City of New York bonds they purchased in January with the proceeds from a loan

from Union Bank. They paid interest of $1,100 on the loan. Cal received a dividend of $640 on

Walmart, Inc. stock he owns. Evann received a dividend of $1,

580 on Facebook, Inc. stock she

owns. Cal and Evann received a dividend of $865 on jointly owned stock in Target, Inc. All of

these dividends are qualified dividends.

4)

The Malecs have qualified educational loan interest expense of $2,800 in 2018.

5)

The

Malecs filed their 2017 federal and state tax returns on April 13, 2018. They paid the

following additional 2017 taxes with their returns: Federal income taxes of $680 and state

income taxes of $330.

6)

The Malecs made timely estimated federal income tax

payments of $1,600 each quarter during

2018. They also made estimated state income taxes of $470 each quarter. The Malecs made

the federal and state fourth quarter estimated tax payments on December 31, 2018. They would

like to receive a refund for any 2

018 overpayment of tax.

7)

Evann received a 2018 K

-

1 from the McBride Partnership interest she purchased two years ago.

Evann materially participates in the partnership. A copy of the K

-

1 is included in the assignment

information in Canvas.

8)

The

Malecs had the following activity in their brokerage account during the year (all transactions

were reported on Form 1099

-

B. Basis information on each stock sale was reported to the IRS):

Sold 75 shares of Apple, Inc

4/15/18

$28,750

Sold 350 shares of

Cooper Tire

10/14/18

$14,700

Relevant tax basis/holding period information related to sales of securities in the current year

:

Purchased 200 shares of Apple, Inc on 3/8/15 for 90,000

Purchased 300 shares of Cooper Tire on 1/12/14 for 19,000

Purchased 5

0 shares of Cooper Tire on 6/28/18 for 2,000

The Malecs have a $5,000 long

-

term capital loss carryover from the prior tax year.

3

9)

Cal and Evann have also provided the following information for 2018:

10)

Cal practices under the name "Cal A. Malec, DogWalker." His business is located at 2412

Parkhaus

Ave., Lincoln, NE 68521, and the employer identification number for the business is

01

-

2233445. Cal's gross receipts for the year were $120,000. Cal uses the cash method of

accounting for his business. Cal's business expenses for 2018 are as follows:

A

dvertising

$1,200

Professional dues

490

Contributions to employee benefit plans

2,000

Insurance

3,200

Fine for overbilling a client

5,000

Insurance of office contents

720

Interest on money borrowed to refurbish office

600

Accounting services

2,100

Miscellaneous office expense

388

Building rent for 2018

12,000

Prescription medicine and drugs (net of insurance reimbur

sement)

$376

Doctor and hospital bills (net of insurance reimbursement)

2,468

Penalty for underpayment of last year's state income tax

15

Real estate taxes on personal residence

4,762

Interest on home mortgage (paid to First State Bank)

The

amount of the loan acquisition debt is $400,000

8,250

Interest on credit cards (vacation and consumer purchases)

595

Cash contribution to First Star Church

3,

230

Professional dues (Evann)

325

Professional subscriptions (Evann)

245

Fee for preparation of 2017 tax return

paid

on April 12, 2018

500

4

Meals & Entertainment

(all meals in 2018)

200

Office & kennel supplies

7,672

Utilities and telephone

3,260

Wages

30,000

Payroll taxes

2,400

In June, Cal decided to refurbish his office and kennel area. This project was completed and the

assets were placed in service on July 1, 2018. Phil's expenditures included $18,000 for new

kennels for boarding animals and $2,200 for a computer. Cal does

not want to immediately

expense any of the assets purchased, or elect to expense under

179. Cal also does not want to

claim any bonus depreciation.

(Election statement to elect out of bonus depreciation is available

in Canvas. Print it out and attach

it to the

return.)

Cal wants to compute his cost recovery

allowance under MACRS. All of the business assets are used 100% f

or business. Business assets

purchased before 2018 have been fully depreciated in years prior to 2018.

The unadjusted basis of all qualified property for purposes of

199A

(Qualified Business Inc

ome

Deduction)

is $46,000.

11)

Evann's

mother, Joseline, died on July 1, 2011, leaving Evann her entire estate. Included in the

estate was Joseline's residence (515 Goodwill, Lincoln, NE 68508). Joseline's basis in the

residence was $50,000. The fair market value of the residence on July 1

, 2011 was $160,000.

The property was distributed from the estate to Evann on January 1, 2012.

From January 1,

2012 until June 30, 2018, they rented the house to the same tenant. The tenant was transferred

to another city for work and moved out of the h

ouse on June 30, 2018. Cal and Evann have

been managing the rental property themselves. Since they did not want to bother finding

another tenant, they sold the house on June 30, 2018. Information regarding the sale of the

rental house will be provided i

n the Tax Return 3 assignment.

In 2018, Malecs collected rent of $1,800 a month for the months the house was rented during

the year. They incurred the following expenses related to the rental in 2018:

Property insurance

$600

Property taxes

800

Mainten

ance

475

Depreciation (to be completed)

?

5

They have depreciated the house using MACRS rules and conventions applicable to residential

rental real estate. To compute depreciation on the house, the Malecs had allocated $15,000 of

the property's basis to

the land.

12)

The Malecs sold a painting on

July 12, 2018 for $14,000

. The Malecs

had received the painting

from Cal's great uncle as a wedding present on June 25, 1980. Cal's great uncle originally

purchased the painting for $2,000 on January 1, 1968. The painting was valued at $25,000 on

the date of the gift. No gift tax was due,

or paid, on the gift.

13)

The Malec's decided to donate $6,000 in cash from the sale of the painting to the local art

museum, which is a qualified charitable organization.

6

AC

CY 171 Fall 2019

Return Summary Form to be submitted with the 201

8

tax return

for Cal and Evann Malec

Group number: #_____

Names of Group members:

Total Gross Income from l

ine 6 of Form 1040

__________________________________

Adjusted Gross Income from line 7 of Form 1040

__________________________________

Itemized Deductions or Standard Deduction from line 8 of Form 1040 _________________________

_

Taxable Inc

ome from line 10

of Form 1040

_________________________________

Tax from line 11

of Form 1040 (attach tax computation)

__________________________________

Total t

ax from line 15

of Form 1040

__________________________________

Line 19 Overpayment or line 22

Amount Due, as applicable __________________________________