Tax Return Problem #3 Brian and Corrine Lee are married taxpayers, filing jointly. They live in the home they own, located at 3301 Pacific Coast Hwy, Laguna Beach, CA 92701. Brian is an optometrist who owns his own business; Corrine is a social worker for Orange County . They have two sons, Brady and Hank. After their trip to China last year, they fell in love with a beautiful one-year-old girl from an orphanage near Shanghai and are in the process of adopting her. The SSNs of the four current members of their household are: Brian, 412-34-5670; Corrine, 412-34-5671; Brady, 412-34-5672 and Hank, 412-34-5673. Their birth dates are as follows: Brian, May 20, 1962; Corrine, July 23, 1962; Brady, September 1, 2000; and Hank, September 11, 2003. The following are Brians income and expense information from his business and Corrines W-2 from the County of Orange.: Lees Optometrist Office Income and Expenses for the current year: Gross income $265,000 Cost of goods sold 88,000 (Beginning inventory $45,000; Purchases $63,000; Ending inventory $20,000) Advertising 5,000 Wages 32,000 Office rent 9,600 Other 2,100 The Lees also made $40,000 in federal estimated tax payments during the year. The Form W-2 Corrine received from the County of Orange contained this information: Box 1 = $76,925.04 Box 2 = $13,085.90 Box 3 = $76,925.04 Box 4 = $ 3,230.85 Box 5 = $76,925.04 Box 6 = $ 1,115.41 In addition, the Lees had the following income and expenses during the year: Income Interest from CDs at Pacific Coast Bank $5,000 Expenses Mortgage interest paid to PC Bank for their home $29,500 Property taxes paid on their residence 7,000 Adoption expenses (fees, court costs and attorneys fees) 8,850 Child care costs at LB Parks and Recreations after school program for Hank 3,500 Prepare the Lees federal tax return for 2011. Use Form 1040, Schedule A, Schedule B, Schedule C, and any appropriate schedules or forms they may need for credits. Do not complete Form 4562 (with the Schedule C). (Assume no AMT although it may apply; Form 6251 or the AMT calculation is not required.) For any missing information, make reasonable assumptions.