Using 2018 IRS Forms and the information below, prepare the federal income tax return for William and Joyce Jones. You are welcome to use any tax return preparation software. But you must include with the completed forms statements for explaining your reasoning for the treatment of each entry on the return The taxpayers live at 4400 Massachusetts Avenue in Washington, D.C. 20016. William is 53 and Joyce is 51. William is a manager for ABC Corporation, a firm that manufactures and distributes widgets. Joyce is a self-employed author of children's books. The Jones have two children, Will, 21 and Tom, 16. The children have no income. The Jones are on the cash method of accounting and their return is due October 15. They wish to minimize their tax by deferring income and accelerating deductions when possible Joyce's social security number is 471-42-5207 William's social security number is 150-52-0546. Will Jr.'s social security number is 372-46-2611 Tom's social security number is 375-49-6511 The taxpayers do not have any foreign bank accounts or foreign trusts and do not wish to contribute to the presidential election campaign fund The taxpayers have health insurance coverage from William's employer Williams' W-2 consists of the following 1 1- Wages x $145,000 2 Withholding 4,500 12d Pension contribution (401k) 7,000 The taxpayers received the following interest payments: 2. $ 50 XYZ Bank New York State Bonds 600 New York City Bonds 1,300 Puerto Rico Bonds 500 Ford Motor Co. Bonds 1,000 furniture 3 Joyce and her brother are co-owners of and active participants in restoration business. Joyce owns 30 percent and her brother owns 70 percent of the business. The business was formed as an S corporation. The basis of Joyce's stock is $31,000. Joyce's share of the corporation's income for the year is $5,000 a 4. The Jones's received a federal income tax refund of $1,200 on May 12, 2018. On May 15 they received a refund from the District of Columbia for $900 which they had deducted on the preceding year's return Joyce is the lucky caller to a received a 1099-MISC, but in announcing the prize, the radio station host said that the manufacturer's suggested retail price for the tablet is $500. However, Joyce has a catalog from Best Buy that advertises the table for $400. local radio station and wins a tablet. She has not 5. The Jones's receive a Form W-2G for their winnings at a local casino showing gross winnings of $5,000 and $1,200 of withholding tax. Joyce lost $6,000 at the casino during the year 6. On June 26, William receives a check for $17,000 (face value of $16,500 plus $500 interest) from the United Insurance Corporation, as a result of being the designated beneficiary of an insurance policy on the life of his uncle. His uncle had paid a premium on the policy of $4,000. 7. 8 Joyce is active in the local school PTA. During the year, she receives an award (a plaque and a $100 gift certificate that were donated to the PTA by local merchants) for outstanding service to the organization. 9 Joyce makes 4 business trips, each 3 days long, to meet with various publishers. For shorter trips that are closer to home she either drives or takes the train and returns on the same day. In December 2018, Joyce receives an advance on her next book. Under the contract, Joyce is scheduled to begin work on the book the following February and must have it completed by November. The taxpayers have 2 telephone lines in their home, one of which is used for her business. The information on Joyce's business is listed below Royalty: West Publishing $14,000 $ 5,000 Publishers Advance S 200 Office Supplies Train Tickets 700 $ 2,000 Airfare Lodging $2,500 Meals $1,000 800 (of which $30/month is for extra phone line) Telephone 10. In January, Joyce purchases a new car for $15,000 to use in her business. Joyce pays $5,000 in cash and finances the balance through the dealer, paying $200 of interest on the loan for the year. During the year she drives 4,000 miles for business and 6,000 for other purposes. Total expenses for the 10,000 miles driven are: repairs and maintenance, $100, insurance, $200 and gasoline, $1,000. 11 At the beginning of the year Joyce set aside a separate room of the house which she uses exclusively for business. The room is 100 square feet of the total 5,000 square feet of the house. The taxpayers purchased the home several years ago for $70,000 with approximately 20 percent of the purchase price attributable to the land. The total household expenses for the year are as follows: eat $2,000 $1,000 Insurance Electricity $1,600 Repairs to kitchen $3,000 Cleaning $1,000 William began work on his MST at American University. He enrolled in two courses 12 and paid $3,000 in tuition and $300 for books William and Joyce each contribute the maximum to their respective IRA accounts for the year. The IRA account is Joyce's only retirement vehicle. In addition, William and Joyce contributed $2,000 to a Coverdell Education Savings Account for Tom 13 14 In June the taxpayers' 2012 station wagon is totaled during a hurricane. The car was purchased for $28,700. The taxpayers received a check for $21,200 from Insurance Company that represents the fair market value ofthe car minus a $750 deductible and they replaced the car with a new car costing $31,400 The taxpayers incurred the following medical expenses before receiving $700 reimbursement from their health insurance policy 15 Medical Premiums $4,000 Doctors $1,000 Chiropractor 600 Dentist $1,000 Vet Fees (family dog) 300 Prescription Drugs $ 300 Over-the-counter drugs (aspirin, cough syrup) 200 16 The taxpayers pay the following property taxes: House $12,000 Car (ad valorem) $ 500 The taxpayers paid the following amounts of interest 17 Bank of America (4400 Mass Ave.) (Mortgage of $200,000) $9,000 Sun Trust (Home Equity Loan of $100,000) $4,000 Nordstrom's $ 100 Bank of America Mastercard 200 The proceeds from the home equity loan were used to build an additional room on the house 18 The taxpayers made a cash contribution to American University of $10,000. They also donated property to the Salvation Army at High Street in Washington, D.C. on July 15 FMV (self-appraised) Property Original Cost Date Acquired $400 Antique Table $225 1/4/02 Dishwasher $100 $700 5/6/06 19 The taxpayers incur the following expenses: Amount Prior year tax preparation fee (paid in current year) $840 Safety deposit box $55 Investment advice $1,120 Business publication (William) $675 20. In January, William inherited his father's summer home that has a fair market value of $500,000 at the date of his father's death. His parents had purchased the house many years ago for $100,000, 20% of which was attributable to the land and made $75,000 worth of capital improvements to it. William decides to rent the property and actively participates in finding a tenant and managing the property. The property is first advertised for rent on March 1, but is not rented until June 1. William provides the following income and expense information for the property: Rent $21,000 Repairs $5,000 $10,000 Prope taxes Insurance $2,000 21. The taxpayers sold the following securities during the year. The selling price listed is net of brokerage commissions and represents the amount the taxpayers receive from the sale Date Sold Date (all sales in current year Sale Purchase Stock Acquired Price Price 150 shares Pfizer Corporation 5/12/90 8/15 $6,000 $7,500 50 shares Alcoa 6/10/07 10/23 $500 $2,000 25 shares Luminent 4/28/CY 9/4 $3,000 $1,000 60 shares Textron 9/11/CY $10,000 10/27 $9,000 On July 1, Joyce purchased a computer, used exclusively for business for $2,000 22. On June 1, Joyce sold her old computer system for $400. She had acquired the computer in 2010, for $2,000. When the taxpayers prepared their 2010 tax return they elected to expense the computer using Section 179. The computer was used exclusively in her business 23 Using 2018 IRS Forms and the information below, prepare the federal income tax return for William and Joyce Jones. You are welcome to use any tax return preparation software. But you must include with the completed forms statements for explaining your reasoning for the treatment of each entry on the return The taxpayers live at 4400 Massachusetts Avenue in Washington, D.C. 20016. William is 53 and Joyce is 51. William is a manager for ABC Corporation, a firm that manufactures and distributes widgets. Joyce is a self-employed author of children's books. The Jones have two children, Will, 21 and Tom, 16. The children have no income. The Jones are on the cash method of accounting and their return is due October 15. They wish to minimize their tax by deferring income and accelerating deductions when possible Joyce's social security number is 471-42-5207 William's social security number is 150-52-0546. Will Jr.'s social security number is 372-46-2611 Tom's social security number is 375-49-6511 The taxpayers do not have any foreign bank accounts or foreign trusts and do not wish to contribute to the presidential election campaign fund The taxpayers have health insurance coverage from William's employer Williams' W-2 consists of the following 1 1- Wages x $145,000 2 Withholding 4,500 12d Pension contribution (401k) 7,000 The taxpayers received the following interest payments: 2. $ 50 XYZ Bank New York State Bonds 600 New York City Bonds 1,300 Puerto Rico Bonds 500 Ford Motor Co. Bonds 1,000 furniture 3 Joyce and her brother are co-owners of and active participants in restoration business. Joyce owns 30 percent and her brother owns 70 percent of the business. The business was formed as an S corporation. The basis of Joyce's stock is $31,000. Joyce's share of the corporation's income for the year is $5,000 a 4. The Jones's received a federal income tax refund of $1,200 on May 12, 2018. On May 15 they received a refund from the District of Columbia for $900 which they had deducted on the preceding year's return Joyce is the lucky caller to a received a 1099-MISC, but in announcing the prize, the radio station host said that the manufacturer's suggested retail price for the tablet is $500. However, Joyce has a catalog from Best Buy that advertises the table for $400. local radio station and wins a tablet. She has not 5. The Jones's receive a Form W-2G for their winnings at a local casino showing gross winnings of $5,000 and $1,200 of withholding tax. Joyce lost $6,000 at the casino during the year 6. On June 26, William receives a check for $17,000 (face value of $16,500 plus $500 interest) from the United Insurance Corporation, as a result of being the designated beneficiary of an insurance policy on the life of his uncle. His uncle had paid a premium on the policy of $4,000. 7. 8 Joyce is active in the local school PTA. During the year, she receives an award (a plaque and a $100 gift certificate that were donated to the PTA by local merchants) for outstanding service to the organization. 9 Joyce makes 4 business trips, each 3 days long, to meet with various publishers. For shorter trips that are closer to home she either drives or takes the train and returns on the same day. In December 2018, Joyce receives an advance on her next book. Under the contract, Joyce is scheduled to begin work on the book the following February and must have it completed by November. The taxpayers have 2 telephone lines in their home, one of which is used for her business. The information on Joyce's business is listed below Royalty: West Publishing $14,000 $ 5,000 Publishers Advance S 200 Office Supplies Train Tickets 700 $ 2,000 Airfare Lodging $2,500 Meals $1,000 800 (of which $30/month is for extra phone line) Telephone 10. In January, Joyce purchases a new car for $15,000 to use in her business. Joyce pays $5,000 in cash and finances the balance through the dealer, paying $200 of interest on the loan for the year. During the year she drives 4,000 miles for business and 6,000 for other purposes. Total expenses for the 10,000 miles driven are: repairs and maintenance, $100, insurance, $200 and gasoline, $1,000. 11 At the beginning of the year Joyce set aside a separate room of the house which she uses exclusively for business. The room is 100 square feet of the total 5,000 square feet of the house. The taxpayers purchased the home several years ago for $70,000 with approximately 20 percent of the purchase price attributable to the land. The total household expenses for the year are as follows: eat $2,000 $1,000 Insurance Electricity $1,600 Repairs to kitchen $3,000 Cleaning $1,000 William began work on his MST at American University. He enrolled in two courses 12 and paid $3,000 in tuition and $300 for books William and Joyce each contribute the maximum to their respective IRA accounts for the year. The IRA account is Joyce's only retirement vehicle. In addition, William and Joyce contributed $2,000 to a Coverdell Education Savings Account for Tom 13 14 In June the taxpayers' 2012 station wagon is totaled during a hurricane. The car was purchased for $28,700. The taxpayers received a check for $21,200 from Insurance Company that represents the fair market value ofthe car minus a $750 deductible and they replaced the car with a new car costing $31,400 The taxpayers incurred the following medical expenses before receiving $700 reimbursement from their health insurance policy 15 Medical Premiums $4,000 Doctors $1,000 Chiropractor 600 Dentist $1,000 Vet Fees (family dog) 300 Prescription Drugs $ 300 Over-the-counter drugs (aspirin, cough syrup) 200 16 The taxpayers pay the following property taxes: House $12,000 Car (ad valorem) $ 500 The taxpayers paid the following amounts of interest 17 Bank of America (4400 Mass Ave.) (Mortgage of $200,000) $9,000 Sun Trust (Home Equity Loan of $100,000) $4,000 Nordstrom's $ 100 Bank of America Mastercard 200 The proceeds from the home equity loan were used to build an additional room on the house 18 The taxpayers made a cash contribution to American University of $10,000. They also donated property to the Salvation Army at High Street in Washington, D.C. on July 15 FMV (self-appraised) Property Original Cost Date Acquired $400 Antique Table $225 1/4/02 Dishwasher $100 $700 5/6/06 19 The taxpayers incur the following expenses: Amount Prior year tax preparation fee (paid in current year) $840 Safety deposit box $55 Investment advice $1,120 Business publication (William) $675 20. In January, William inherited his father's summer home that has a fair market value of $500,000 at the date of his father's death. His parents had purchased the house many years ago for $100,000, 20% of which was attributable to the land and made $75,000 worth of capital improvements to it. William decides to rent the property and actively participates in finding a tenant and managing the property. The property is first advertised for rent on March 1, but is not rented until June 1. William provides the following income and expense information for the property: Rent $21,000 Repairs $5,000 $10,000 Prope taxes Insurance $2,000 21. The taxpayers sold the following securities during the year. The selling price listed is net of brokerage commissions and represents the amount the taxpayers receive from the sale Date Sold Date (all sales in current year Sale Purchase Stock Acquired Price Price 150 shares Pfizer Corporation 5/12/90 8/15 $6,000 $7,500 50 shares Alcoa 6/10/07 10/23 $500 $2,000 25 shares Luminent 4/28/CY 9/4 $3,000 $1,000 60 shares Textron 9/11/CY $10,000 10/27 $9,000 On July 1, Joyce purchased a computer, used exclusively for business for $2,000 22. On June 1, Joyce sold her old computer system for $400. She had acquired the computer in 2010, for $2,000. When the taxpayers prepared their 2010 tax return they elected to expense the computer using Section 179. The computer was used exclusively in her business 23