Taxpayer Facts:<\/u><\/p>
<\/strong><\/p> 1.Thomas McNeil is employed as an airline pilot for Rocky Mountain Airlines in Denver, CO. Rachel is a self-employed tour guide. They have been married since 1993. Thomas and Rachel live in a home they purchased this year. Thomas and Rachel have two children who live with them all year, Robert (24) and Denise (16) Thomas and Rachel provided the following personal information:<\/p> a.Thomas and Rachel do not want to contribute to the presidential election campaign.<\/p> b.Thomas and Rachel live at 21905 Inspiration Dr., Henderson, CO 80022<\/p> c.Thomas's birthday is 10\/12\/1970 and his Social Security number is 555-55-5551<\/p> d.Rachel's birthday is 7\/16\/1973 and her Social Security number is 444-44-4442<\/p> e.Robert's birthday is 6\/30\/1994 and his Social Security number is 454-54-5454<\/p> f.Denise's birthday is 8\/12\/2002 and her Social Security number is 343-43-4343<\/p> <\/p> 2.During 2018, Thomas and Rachel received $550 in interest from City of Denver municipal bonds, $1,070 interest from US Treasury bonds, and $65 from their savings account at SCD Credit Union. Thomas and Rachel are joint owners of the City of Denver bonds and the US Treasury bonds. They have a joint savings account at SCD Credit Union. See attached Forms 1099-INT for each.<\/p> <\/p> 3.On January 21, 2018, Rachel was involved in a car accident. Because the other driver was at fault, the other driver's insurance company paid Rachel $1,350 for medical expenses<\/p> <\/p> relating to her injuries from the accident and $300 for emotional distress from the accident. She received payment on March 15, 2018.<\/p> <\/p> 4.Thomas's father died on November 15, 2017. Thomas received a $100,000 death benefit from his father's life insurance policy on February 8, 2018.<\/p> <\/p> 5.Rachel had always wanted to own her own business. In January, she decided to go for it and began devising a business plan. She incurred the following expenses from January 1 through May 31st:<\/p> Legal Fees$500<\/p> Expenses for market analysis$750<\/p> <\/p> 6.Rachel began business operations on June 1. She earned total gross revenues for the year from her cake making business of $30,000, and paid $11,000 for Cost of Goods Sold items.She has no beginning or ending inventory. She uses the cash method of accounting. She was not issued a 1099-MISC or a 1099-K. The total revenues match the bank deposits she made from June 1 to December 31. Rachel is a sole proprietor and reports on the cash basis of accounting. Her business name is \"Rachel's Rockin' Cakes\" and her office address is: 975 Twisty Pines Ln, Denver, CO 80205.Her business is classified as a retail business and can be listed under \"Baked Goods Stores\" with a business code of 445291.<\/p> <\/p> 7.From June 1 to December 31, Rachel incurred the following additional business operating expenses:<\/p> Advertising<\/p> $1,550<\/p> Insurance Expense<\/p> 350<\/p> Interest Expense from loan<\/p> 675<\/p> Legal\/Accounting Exp<\/p> 750<\/p> Kitchen rent<\/p> 1,200<\/p> Supplies<\/p> 925<\/p> Meals<\/p> 500<\/p> <\/p> Rachel did not pay any individuals for services, so she was not required to issue any 1099-MISC forms for this year.<\/p> <\/p> Rachel owns a Ford Explorer (SUV under 6000 lbs) which she used for business purposes (she first used this SUV for business on June 1, 2016). She chooses to use the standard mileage expense method to account for her auto deduction. The total miles she drove for the year were 14,000. Of the total driven, business mileage was 8,400, and personal miles were 5,600. She keeps a written log-book of all her mileage to document business travel.<\/p> Thomas and Rachel also have another vehicle for personal use. The vehicle is primarily used by Rachel who is the sole owner of the business. She would like to elect the standard mileage method for tax purposes. See #17 for property tax paid on the SUV.<\/p> <\/p> Rachel is on Thomas' health insurance, so she does not need coverage through her business.<\/p> Rachel's business is a Qualified Trade or Business and does not meet the definition of a Specified Service Trade or Business.<\/p> <\/p> 8.On May 17, 2018, Thomas and Rachel received a federal income tax refund of $975 from their 2017 federal income tax return.<\/p> <\/p> 9.On June 5, 2018, Thomas's aunt Beatrice gave Thomas $18,000 because she wanted to let everyone know that Thomas is her favorite nephew.<\/p> <\/p> 10.One September 29, 2018, Rachel won an iPad valued at $500 in a raffle at the annual fair held at Denise's high school.<\/p> <\/p> 11.Thomas and Rachel have qualifying insurance for the entire family for the purposes of the Affordable Care Act (ACA).<\/p> <\/p> 12.Thomas goes gambling with some buddies on New Year's Day (January 1, 2018) and wins<\/p> $2,300 on a slot machine. However, he did not receive a W-2G for his winnings.<\/p> <\/p> 13.Rachel has a girl's weekend over Mother's Day (May 11, 2018), but she is not as lucky as Thomas and loses $1,400.<\/p> <\/p> 14.Thomas and Rachel paid $24,000 in total mortgage expenses in 2018. Within these payments were $5,500 of real estate property tax for the residence and $8,900 in interest expense. See attached Form 1098-MTG issued by their mortgage company.<\/p> <\/p> 15.Thomas and Rachel had $4,200 of additional medical expenses in 2018. This does not include the amounts used for injuries where they received reimbursement of their medical bills.<\/p> <\/p> 16.Thomas and Rachel own two vehicles. Their Ford Explorer is a 2017 model. They paid<\/p> $1,200 to register the Explorer in November of 2018. Of this registration fee, $800 was in ownership tax and $400 was in fees.Rachel did claim this vehicle for business mileage, but she only used it half of the year for business. Their Audi S4 is a 2016 model. They paid $1,400 to register the Audi in 2018. Of that registration fee, $900 was is ownership tax and $500 was in fees. The Audi was not used for business purposes. (Hint: the Explorer is part business part personal. Prorate that tax above by multiplying its tax by 60% [8,400\/14,000]).<\/p> <\/p> 17.Thomas, who graduated from Metro State University in 1993, is a proud supporter of his Alma mater. He donated cash of $6,500 to their scholarship fund in 2018. The scholarship fund is appropriately classified as a 501(c)(3) non-profit organization.<\/p> <\/p> 18.Rachel supports the Denver Dumb Friends league and donated cash of $4,000 to them in 2018. The Denver Dumb Friends League is registered as a non-profit 501(c)(3) organization.<\/p> <\/p> 19.Robert is in his second year of college at MSU. He is a full-time student studying accounting. He lived at home and his parents paid his tuition, books and fees. Tuition, books and fees costs were $18,000 for the year. His books of $1,100 (included in the $18,000) did not have to be purchased at the MSU bookstore. See attached Form 1098-T.<\/p> <\/p> 20.Robert also worked a part-time job at JavaSmooth Smoothie Emporium.He made $3,875 for the year.<\/p> <\/p> 21.Thomas had $5,724 of Colorado tax withheld on his W-2 for the year.<\/p>",
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"title": "Income Tax Fundamentals 2013",
"isbn": "1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516",
"edition": "31st Edition",
"authors": "Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill",
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"question_posted": "2024-06-28 07:38:14",
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