Tax return project:

Instructions: Each of the following situations involves individuals who have asked you to prepare their tax returns. To complete the following, you must use actual 2016 tax forms. IRS- approved computer tax forms are acceptable.

You must choose the proper tax forms to prepare the returns, including any backup schedules, as necessary. For example, if a taxpayer has business income, you must file a Schedule C and any related schedules. Handle this tax return preparation as if you were to mail the completed forms to the IRS.

III. Maria Scarnechia (064-38-1115) is 55 and is an unmarried, self-employed doctor. She resides at 210 Washington Street Bristol, CT 06028. Marias husband, Peter died in 2009. She continues to maintain a home for the blind, 16 year old dependent son, Danny (387-12-3457). Marias telephone number is 202-555-1234.

The relevant tax information given to you includes the following:

1. Maria used the cash method of accounting in her business. Her business. Her employer identification number is 33-1236547. Income and expenses pertaining to her business is as follows:

a. Fees collected $187,000

b. Business bad debt written off $2,000

c. Lethal and accounting services $2,500

d. Qualifying business meals and entertainment $1,400

e. Medical journals $800

f. Office supplies $1,300

g. Continuing education self-study courses $3,550

h. Malpractice insurance $34,000

i. Part time secretary hired from Kelly Services $10,000

Maria Scarnechia

2. During the year, Maria worked at St. Eligius and Hope Hospital, both in New London, CT. While she spent 30-35 hours per week working at the hospitals, Maria was not provided with an office at either hospital. Instead Maria used a bedroom in her house for an office. There, she kept a computer an answering machine, a copier, telephone, patient records, medical books, and journals. From the office, Maria contacted the other doctors and patients by phone. In addition, she often called the hospital to arrange admission of her patients. She did all the necessary work to bill her patients in this office. She used this space to prepare to meet patients but actually met them only at one of the hospitals. On average, Maria spent 16 hours per week working from her home office during this year. Maria did not use the office for any non-business purposes. Her secretary also worked in the home office.

Maria had the following expenses relevant to determining a home office expense deduction:

The bedroom represented approximately 20% of the total square footage of her house.

Total interest expense paid on her home mortgage was $17,000

Marias utility bills for the residence were $2,800

Property taxes on the house amounted to $2,100 for the year

Maria paid $210,000 for the house when she purchased it on January 1 of this year.

Maria had a second telephone line installed that can only be answered in her office. The cost of this business phone was $680 for the year.

In march, Maria purchased office furniture costing $8,000

3. Maria made timely quarterly federal income tax payments of $40,000 ($10,000 per quarter) during the year. All payments were made for tax year 2016. No other federal income tax payments were made. She also made estimated income tax payments totaling $3,670 to the state of Connecticut. Similarly, all payments applied only to 2016.

4. Maria received $1,000 in interest a saving account at ESPN Bank. In addition she received a $600 qualified dividend payment from Connecticut General Mutual Life Insurance on a policy that she owns on her life. She paid premiums on the policy of $2,500 in 2016.

5. Maria received a final settlement on life insurance policy held on Mr. Scarnechia. She received a lump sum of $100,000 plus the first payment of $5,500 as part of a life-time annuity. Prudential Insurance reported that $1,500 of this amount was interest.

6. Maria also had the following transactions:

a. Doctor fees for Danny Scarnecchia, $5,000

b. Real estate taxes on land owned in Haiti, $7,000