You are to complete a 2017 Individual Income Tax Return (Form 1040) with other forms and schedules as required. You can get required blank forms and schedules from irs.gov/forms. Your clients are John and Patty Bloomington. John is 43 years old and employed by Hose Company. Patty brings you his Form W-2 that shows gross wages of $60,000 and federal income tax withholding of $12,000. There is no other information on the W-2 that is relevant to this exercise. Johns social security number is 459-555-1997. He lives at 100 Main Street, Anytown, TX 75067. John is married to Patty Bloomington and they will file a joint return. She is also 43 years of age. Her social security number is 459-64-1975. Patty is, and has been for several years, the sole proprietor of a Beauty Salon known as Pattys Hair Salon. It is located at 2200 Main Street, Suite 10, Anytown, TX 75067. Patty uses the cash method of accounting. She materially participates in the business. She uses contract beauticians to help her and in 2017 she provided each of them timely filed Forms 1099 showing the amount she paid each of them during the year. Patty bring you an Excel spreadsheet of her income and expenses for the year for the Salon. You have done the Bloomingtons federal income tax returns for several years and you have confidence that her spreadsheet is accurate and reliable, even if somewhat jumbled. Patty does not sell any products, therefore she has no beginning or ending inventory. 2 11/19/2018 6:27 PM Her spreadsheet reports the following: Accounting fees $ 200 Laundry and cleaning 1,500 Uniforms for her beauticians 600 Rent 5,400 Gross income 32,000 Supplies 5,000 Advertising 150 Utilities 250 Contract labor 17,500 In addition to this spreadsheet, Patty bring you receipts for the purchase on June 16, 2017 of 5 beauty chairs at a cost of $2,000 each. They know that this type of fixtures have a 5-year depreciable life. You discuss various depreciation and expensing options with Patty. She agrees that an election to use section 179 expensing for the chairs rather than capitalizing and depreciating them over the 5-year period would be more advantageous for her. John and Patty have two children: Johnny Bloomington was born on November 18, 1997. His social security number is 458-94-1548. Johnny is a first-year full-time student at Texas Womans University. Johnny received a Form 1098-T from the University showing tuition paid in 2017 in the amount of $6,000. In addition, the family paid $500 for Johnnys book and supplies. Johnny has no income of his own. Other than the time he was at school, Johnny lived with his family. You point out to Patty that they may be able to deduct these costs as educational expenses, or they may be able to take an American Opportunity Tax Credit for them. You will do which of these that produces the best benefit for the family. Sarah Blooming was born on November 18, 2002 (hum, November 18 again; it must be the water). Her social security number is 456- 94-7891. Sarah is a high-school student and has no income of her own. She lived with her family the entire year. John and Patty are frugal taxpayers. They have a saving account at Ace Bank. They received Form 1099-INT from the bank reporting $1,749 in interest earned on the account during 2017. They also have some corporate investments. They received a Form 1099-DIV from Disney Corporation reporting $600 in qualifying dividends paid to them during the year. 3 11/19/2018 6:27 PM John did, however, bail out of a loosing investment during the year. He purchased 100 shares of stock in Hardware Online on January 3, 2016 for a total investment of $1,650. Turned out, Hardware Online was not the Amazon John expected it to be. Online hardware purchases just couldnt compete with Lowes, Home Depot and Amazon itself. John dumped the stock on December 29, 2017 for a sales price of $1,000. John and Sarah own their own home. During 2017. They received a Form 1098 from their mortgage company reporting $3,550 in real estate taxes and $7,600 in home mortgage interest paid from their escrow account during 2017. (They would also have been eligible to for a general sales tax deduction for the year. For purposes of this exercise, please disregard that computation.) The family had no deductible medical expenses during the year because they were fully covered by qualifying medical insurance. The family made $4,500 in cash contributions to the church they attend weekly. Patty presented to you a confirming letter from the church reporting that amount and certifying that the family received no goods and services in exchange for their contributions. With this information, please prepare the Bloomingtons 2017 Form 1040 with all the additional necessary forms and schedules.

John's investment loss was reported to him by is stockbroker on Form 1099-B. Basis was reported to the IRS. You will NOT need to report this transaction on Form 8949.

You may find that you need the employer identification number of the school Johnny attends. Use 75-6002618. If I have told you differently in a personal email or private conversation, please forgive me and use this one.

Neither John nor Patty wish to contribute to any Presidential Election Campaign.

To repeat one line of the instructions, if the answer to a question is zero you may enter zero, 0 or none. Canvas will accept any of these.

The family has no foreign investments or trusts nor does any member of the family have signature authority over a foreign financial instrument.

If you find you need to use a Form 8812, disregard Part I.

All of Patty's workers in her beauty salon are independent contractors. She timely provided each of them with a Form 1099-MISC and filed the related information timely to the IRS.