The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1 and 2.

On September 1, Irene opened a retail store that specializes in sports car accessories. The name of the store is ''Plus Two Cones.'' The store is located at 617 Main Street, Spokane, WA. The store uses the cash method of accounting. Her income and expenses for the year are as follows:

Sales of merchandise.................................................................$62,300

Inventory, September 1 (purchased in August) ...................................62,500

Inventory, December 31..............................................................58,700

Purchases during the year............................................................35,300

Sales returns and allowances............................................................525

Store rental..............................................................................7,500

Office expense..........................................................................1,400

Insurance.................................................................................1,000

Advertising ..............................................................................3,000

Employee wages........................................................................3,350

Payroll and other business taxes.........................................................505

Interest on bank loan to open store...................................................2,740

Accounting fees ...........................................................................300

Utilities......................................................................................1,000

Telephone.....................................................................................800

Maintenance..................................................................................480

Miscellaneous................................................................................175

In addition to the above items, Irene incurred travel expenses to attend a seminar on sports car accessories. She spent $300 on airfare, $400 on lodging, $100 on a rental car, and $150 on meals. Irene has proper receipts for these amounts.

Irene drove her 2004 Ford Explorer 1,472 miles for business, driven after September 1, 2012, related to Plus Two Cones. The Explorer was driven a total of 17,000 business and personal miles for the year. Included in the 17,000 is 5,000 miles spent commuting to the store. Irene has the required substantiation for this business mileage. She uses the standard mileage method.

In July, Ivan loaned a friend $7,000 so he could buy a car. Ivan's friend lost his job in 2012 and stopped making payments on the loan. He plans to start making payments again, however, with additional interest as soon as he has new employment.

Required: Combine this new information about the Incisor family with the information from Chapters 1 and 2 and complete a revised 2012 tax return for Ivan and Irene. Be sure to save your data input files since this case will be expanded with more tax information in later chapters.

Transcribed Image Text:

U.S. Individual Income Tax Return OMB No. 154-0074 RS Make sure the85above Check only one Mariad ling joiny (evan if anly one had ineoma) Mamied fing separsnety, Emer spouses sSN above Exemptions Yourbet. ir someone can clalm you as a dependent, do mot check boa da Firnt name dependents, bee nstructions and check here d Total rumber Income7 7 Wages, salaries, tips,en. Artach Fome) W-2 Ba Taxable intereat. Altach Schedue B if sequired b Tax-exempt inberest. Do net include on ine 8a Artach Forma Ordiary dividends. Attach Schedule B if required b Qualned dhvidends 10 Taxable refunds, cedits, or offats of atate and local income tae 1000-Ri 12 Business income or (os, Attach Schedule CorC-Z 4 Other gains or Dossest. Aach Form 4797 16อ Ponsions and annuities 18 Farm income or loss, Attach Schedale F itzd gain or 0088h Atach Schedule Dif regred. If not required, check here ๛ 0113 b Taxable amount b Taxabla amount see instructions 15a IRA distributions Rental real estate, royaliies partnerships, 8 corporaians, trusts, ete. Attach Bchedale E17 not attach, an payment. Also, please us Form 1040-V Unemployment compersation 20a Social security beneits 20s 21 Othor inoome. List type and amount 22 Combine the 23 Edueator 24 Certain business expenses of reservists, perfoming atists, and b Taxable amount amounts in the column tor lines 7 aa-basis gowamment oficals Attach Fom 2106 or 2106-EZ 25 Heamh 8aings account deduction. Artach form ซิ009 26 Moving expenses. Attach Form 3803 27 Deductible part of self-emplayment tax. Attach Schedule SE 27 28 Sot-employed SEP. SIMPLE, and qualified plans 29 Sel-employed heath insurance deduction 30 Penalty on early withdrawal of savings 32 IRA deduction Student loan interest deduction Tuition and tees.Altach Fom 891T 33 35 Donete preduotion ativ ities deduation. Attach Fom 803 36 36 Add in 23 through36 37 Subtract ling 38 from ine 22. This a Form 1040 (2011) Page 2 38 39a Amount from line 37 (adjusted gross income). Cheak You were bom before January 2, 1947, Tax and Blind. Total boxes if Spouse was bom before Janusry 2, 1947, Blind. cheoked 39a b If your spouse itamizes on a separate retum or you were a dual-status alien, check here39b 0 ltemized deductions (from Schedule A) or your standard deduction (see left margin e People who 41 Subtract line 40 from line 38 check anyw box on n% |42 Exemptions. Multiply $3.700 by the number on ine Bd 39a or 39bor 43 axable income. Subtract line 42 from line 41. f line 42 is more than ine 41, enter -D- who can carmed asa | 44 Так (see instructions). Check ifany from: a [] Forms) 8814 b Form 4972 c 962 election | 44 Alternative minimum tax (see instructione). Attach Form 6251 instructions. 48 Add lines 44 and 45 46 All others 7 Foreign tax credit. Attach Form 1118 if required Credit for chid and dependent cane expanses. Attach Form 2441 9 Education aredits from Form 8863, line 23 Marned fiing 48 geparately 48 Married fling 0 Retirement savings oontributions credit. Attach Form 8880 0 1 Chid tax crodit (pee instructions) 52 Residential energy credits. Attach Farrm 5895 53 ceeraredtstrom Form: a 3800 b 8801 c 54 Add lines 47 through 53. These aro your total credits 55 Subtract line 54 from line 46. If lne 54 is more than line 46, enter-0 S6 Self-emplayment tax. Attach Sahedule SE 7 Unreported social security and Medicare tax from Form: a 4137 b 8919 58 Additional tax on IRAs other quained retirement plans, etc. Attach Form 5329 required 9a Housshold employment taxes from ScheduleH widower. | |82 .г. Head of Taxes b 80 61 First-time homebuyer credit repayment. Attach Form 5405 if required Other taxes. Enter codes) from nstructions Add lines 55 h 60. This is Payments 2 Federal income tax withheld from Foms W-2 and 1099 If you havea child, attach 63 4a 2011 estimated tax payments and amount applied from 2010 return 63 Earned income credit (EIc) b Nontauable combat pay election 64b Schedule EIC. 65 Additionel child tax credit. Attach Form 8812 66 American opportunity credit from Fom 8863, ine 14 67 First-time homebuyer aredit from Form 5405, ine 10 68 Amount paid with request for extension to tle 69 Excess social security and tier 1 RRTA tax withheld. 70 Credit for federal tax on fuels. Attach Form 4136 71 Credts from Form a 2439 b 839 c 801 d 8885 71 72 Add lines 62, 63, 64a, and 65 T2 72 Add Ines 62, 63, 64a, and 65 71. These are your totel payments 72 Refund 73 line 72 is more than line 61, subtract line 61 from lina 72. This is the amount you overpaid 73 Amount of line 73 you want retunded to you. it Form 8888 is attached, check ere74 74 Direct deposit?b Routing number See Type □ Checking □ Savings d Account number 75 Amount of Ine 73 you want 76 Amount you owe. Subtract line 72 from line 61. For details on how to pay, see instructions ed to your 2012 estimated tax75 76 You Owe Third Party Designee Denee's Estimated tax Do you want to allow another person to discuss this return with the IRS (Bee instructions? Yes. Complete below No Phone Persenal identiicetion gn Here Joint retum? See Under peraities of perjryIdeclare that I have ecamined this netum and accompaying schedules and statemerts, and to the best of my knowiedge and belef ny aretrue, correct, ara complete. Decar硝on o' preparer (Oheran tapayer) is based on all normation of which preparer hasany knowwge. Your signature Spouse's signature. a joint roturn, both must sign Date Date Your occupation Daytime phone number Keep a copy for your neoords Spouse's occupation the IRS sant you an idenity Protecion PIN, enter it Preparer's signature Date Paid Preparer Use Only Fim's are Firm's EIN Phone no Fom 1040 2011) SCHEDULE C Form 1040) Deparment of the Treasury Name of proprietor Profit or Loss From Business Sole Proprietorship) For information on Schedule C and its instructions, go to www.irs.gov/schedulec Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065 OMB No. 1545-0074 Saquanoe No. 09 Social security number (SSNI A Principal business or profession, including product or service (see instructions C Business name. If no separate business name, leave blank. E Business address (ncluding suite or room no) B Enter code from instructions D Empleyee ID number EINL (int town or state, and ZIP code F Accounting method: ) as 2Aral3) Other (specify) G Did you ate any participate in the operation of this business during 2011 PM No see instructions for lmit on losses H Ifyou started or acquired this businees during 2011, check here IDid you make any payments in 2011 that would require you to fille Form() 1099 (see instruotions) Yes No □Yes □No If Yes," did you or will you file all required Forms 1099? Part I Income 1a Marchant card and third party payments. For 2011, enter-0 b Gross receipts or sales not entered on ine 1a (pee instructions). c income reported to you on Form W-2 if the "Statutory Employee" box on 1b that form was checked. Caution. See instr. before completing this line d Total gross reoeipts. Add lines 1a through 1 2 Retums and allowances plus any other adjustments (see instructions) . 3 Subtract line 2 from line 1d 4 Cost of goods sold (from line 42) 5 Gross profit. Subtract line 4 from line 3 . . 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) id Gross income. Add lines 5 and Part II Enter expenses for business use of your home o nly on line 30. 8 Advertising 9 18 19 20 Office expense (see instructions) 18 19 Car and truck expenses (see Pension and profit-sharing plans Rent or lease (see instructionsk 10 Commissions and fees 11 Contract labor (see instructions) 11 12 Depletion 13 a Vehicles, machinery, and equipment 20a Depreclation and section 179 inaluded in Part ) (see Employee benefit programs b Other business property 21 Repairs and maintenance 22 Supplies inot included in Part 22 23 Taxes and licenses 24 Travel, meals, and entertainment 14 a Travel (other than on line 19) b Deductible meals and 15 Insurance (other than helh 15 a Mortgage (paid to banks, etc. 16a services17 entertanment (see instructions)24b 16 Interest 25 Utilities 26 Wages (less employment credits). 26 27a Other expenses (from line 48) Reserved for future use b Other 16b 27a b 28 28 Total expenses belore expenses for business use of home. Add ines 8 through 27a 29 Tentative profit or (loss), Subtract line 28 from line 7 30 Expenses for business usa of your homa, Attach Form 8829. Do not report such expenses eleewhere 31 Net profit or (loss) Subtract line 30 from line 29. If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2 If you entered an amount on line 1c, see instr. Estates and trusts, enter on Form 1041, line 3 - If a loss, you must go to ine 32 32 Ifyou have a loes, check the box that describes your investment in this activity (see instructions If you checked 32a, enter the loss on both Form 1040, line 12, for Form 1040NR, line 13) and on Schedule SE, line 2. If you entered an amount on line 1c, see the instructions for ine 31 Estates and trusts, enter on Form 1041, line 3. 32aAll investment is at risk. 2bSome investment is not at risk. must attach Form 6198. Your loss be imited For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11334P Schedule C (Form 1040) 2011 Page 2 Part III 33 Methodis) used to 34 Was there any change in determining quantities, costs, or valuations between opaning and closing inventory Cost of Goods Sold (see instruction value closing inventory: ฮ cost bLower of cost or market □ Other (attach explanation) If "Yes," attach explanation Yes N 35 Inventory at beginning of year. If different from last year's dlasing inventory, attach explanation 36 Purchases less cost of items withdrawn for personal use. 37 Cost of labor. Do not include any amounts paid to yoursel 38 Materials and supplies 39 Other ooets 40 Add lines 35 through 39 41 Inventory at end of year 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4 35 30 37 38 39 40 41 42 Part IV Information on Your Vehicle. Complete this part only if you are clalming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562 43 when did you place your vehicle n service for busness purposes ? (month, day, year) 、……………-/ 44 Of the total number of miles you drove your vehicle during 2011, enter the number of mles you used your vehicle for a Business 45 Was your vehiale available for personal use during off-duty hours? 46 Do you (or your spouse) have another vehicle available for personal use? 47a Do you have avidence to support your deduction? b Commuting (see instructions) c Other □Yes □ No Yes □No b I Yes," is the evidence written? Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30 48 Total other expenses. Enter here and on line 27a 48 Schedule C Form 104 2011 SCHEDULE D Form 1040) OMB No. 1545-0004 Capital Gains and Losses Artach to Form 1040 or Form 1040NR. See Instructions for Schedule D (Formm 1040 Use Form 8040 to list your transactions for lEnes 1,2,3 &, 0, and 10o social security number Part Short-Term Capital Gains and Losses-Assets Held One Year or Less Complete Fom 8949 before completing line 1, 2, or 3 Sales price trom n Cost or Gain or This form may be easier to complete if you round off cents to whole dollars. m m. ro m 89n. | Form) 8040 1 Short-term tctals from all Forms 8949 with box A checked in Part checked in Part I checked in Part 2 Short-term totals from all Forms 8949 with box B 3 Short-torm totals from all Forms 9949 with boK 4 Shon-tem gain from Form 6252 and short-term gain or (loes) from Forms 4684, 6781, and 8824 5 Net short-term gain or (loss from partnerships, S corporations, estates, and trusts from Schedules) K-1 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover 7 Net short-term capital gain or (loss). Combine lines 1 through 6 in column (hf you have any Long-Term Capital Gains and Losses-Assets Held More Than One Year Worksheet in the instructions long-term capital gains or losses,go to Part ll below. Otherwise, go to Part Ill on the back Complete Form 8949 bafore completing line 8,9, or 10. This form may be easler to complete if you round off cents to Fom 8349, line4 whole dollars elSales prce omn Cost or thar Gain or gain or lcen em Fom) 8348 Combine colamm column (e) and g 8 Long-tarm totals from all Farms 8949 with box A checked in Part II 9 Long-torm totals from all Fanms 8949 with box B checked in Part lI checked in PartII from Forms 4684, 6781, and 8824 10 Long-term tota from all Forms 8g49 with box C 11 Gain from Form 4797, Part long-term gain from Forms 2439 and 6252; and long-term gain or oss) 12 Net long-temm gain or (loss) from partnerships, S corporations, estates, and trusts from Schadulals) K-1 12 13 Capital gain distributions. See the instructions 14 Long-term capital loss carryover. Eier the amount, if any, Trom line 13 of your Capital Loss Carryover Worksheet in the instructions 15 Net long-term capital gain or (loss). Combine lines 8 through 14 in column (h).Then go to Part Ill on the back For Paperwork Reduction Act Notice, see vour tax return instructions Schedule D (Form 10401 2011 Schedule D Fom 1040) 2011 Part III Summary 16 Combine ines 7 and 15 and enter the resu Pige 2 16 I line 18 is a gain, enter the amount from ine 16 on Form 1040, line 13, ar Form 1040NR, line 14. Then go to line 17 below. If line 16 is a loss, slop lines 17 through 20 below, Then go to line 21. Also bo sure to complste ine 22 line 16 ів zero, akip lines 17 through 21 below and enter-Q on Form 1040, line 13, or Form 1040NR, Iine 14. Then go to line 22 17 Are Ines 15 and 16 both gains? □Yes, Go to line 18. No. Skip lines 18 through 21, and go to line 22. 18 Entr the amount, if any, from line 7 of the 28% Rate Gain Worksheet in the instructions 18 19 Enter the amount, i any, from linc 18 of the Unrecaptured Seation 1250 Gain Worksheet in the 19 20 Are ines 18 and 19 both zero or blank □ Yes. Complete Form 1040 through line 43, or Form 1040NR through line 41 . Then complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, Ene 42). Do not complete linee 21 and 22 below. No. Complete Fom 1040 through line 43, or Form 1040NR through line 41. Then complete the Schedule D Tax Worksheet in the instructions. Do not complete ines 21 and 22 below. 21 H line 16 is a loss, enter here and on Form 1040, Iine 13, or Form 1040NR, line 14, the smaler of 21 .The loss on line 16 or "侈3,000), or if marred filing separately, ($1 ,500, Note. When figuring which amount is smaller, treat both amounts as positive nunbers 22 Do you have qualified dividends on Form 1040, line 9b, or Form 1040NR line 10b? Yes. Complete Form 1040 through line 43, or Form 1040NR through line 41 . Then complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, ine 42) No. Complete the rest of Form 1040 or Form 1040NR Schedule D Fonn 10401 2011 8949 Sales and Other Dispositions of Capital Assets 2011 Anach to BeheduloDtolat your tr.ernactiora Ir ines 1, 2, 3,8,9., and 10.. PartIShort-Torm Capital Gains and Losses-Assets Held One Year or Leas NotK You must check one of ฐาค bones beiw. Corrplete 3epras. Fomm 8949, page 1, lor sach box that is checked. caution. Donot complete 0olurm It冲or util you hare read the nstructions tor those counnstsee the kstud lons lor Schedule DIForm10400 Col msp. and 10 do not agply for most transactions and should generaly be虓blank. 阗Sort-term r notere eported on □ B)Short ten tanso tons reponed on Form (C Short term transactons for wrich 2 Totals. Add the amcunts in columns lai and n. Aso, combine no amounts in oolumn Entar hare and include on Sahedule D, line 1 01 box A above is checkedt, Ine 2 box B above is checked), or ine 30 box C above is 1040 s Individual Income Tax Retum2011ca e 1rms nsm U.S. Individual Inoome Tax Retum uoions and Crdinary dividends Anach 8chadsle equied Nirnony recelve Income account deduction FRA deduction Turion and a fees Aach Fon 891 | Page 2 used Checke bee belove January 2, 1947, Totlb Hemined deductions [rom Schedde N ar your standaid deduction ( et magi Cmpor Mubiply 55,700 by the number on n Fonsigs tax credit Artach Formm 111 quin Cradit tor bhessen oud tornFeen ธ863. Bo. 2 3 ss.anok |49 redit isee instructions Other 8empax 57 Umuportad socal sorty.nd Nekan tx tun rom . 4137 b0ธฏ19 creat IC Credit Fer a Anont of se 73 you want refunded to you If Fom 8338 is atached, checkhee Third PartyDnt to Use Only w SCHEDULE B orm 904DA ar 1040 Interest and Ordinary Dividends buyer used the property as a personal residence, se0 instructions on baok and ist thie interest first Aloo show that buyer's social security number and acdrees Interest 040A, Fom 10a0 Note. you NT, Form a brokerage Im 2 Add the amounts on line 1 htal irstExclule nterest on senee Et and U.S.tings bonds issued aher 13 Attach Form 8815 4 Bubtact ise 3 from ine 2. Enter the rt hare and on Fom 10404 r Form Note H Ordinary Intructions Nete.Itf tet tham Add the mourts on in 5. Enter the botdl hare and an Form 1040A or Fom You must complete his part fyou (a) had ower $1,500 of sable ireest or rdinary dvidends; (b] had a Part III ing 2012 dd you in or signature account (such as a bank acoount, seourties aooount, or bsokerage aocount locshed in a foreign If Yes, are you required to tle Form TD F 90-221 soreport that inancial interest or sigture authorrty? Sce Form TD F 80-22.1 and its instucions for ting requirements and eooceptione to and Trusts renmn5 on blfyou ฒจ required to fil. Fomm TD F90-22.1,antar the nam. of the foreign coutrywherh l account s located 8 During 2012, did you reoaiva a chatbution from, or ware you the gramor ot or tranforor o, a trust? H "Yes 3520 See netructions on back Otherftach eparation or personal and supplie 35 trough 30 nweetoy at end of year iformation on Your vehicle. Oorplata this part only if you are ctaining oie or truck gopensea on line 9 nd aro not roquired to fie Form 4562 for this businoss. So0 the instructions for line 13 to find out if you must e Form 4582 7a Do you hav aidence to support your deduction? 8829 Expenses for Business Use of Your Home inventory or product sampes Isee intruotione 2 Total area gt haome 3 Oide ine 1 by ino 2.Enter the resuit as a percentage For diaycare facilities not used wxclusely for busineas, go to line 4 All others go to line7 4 Multiply days used for daycare during year by hours used per day 6 Dide line 4 by ine 5.Enter the reeut an a decimal amount Buiss percentage. For daycire faclities not usedey for bs amount from lineS as a percemaoi. All others Enar tha amount from Schacuie G, ina 20, plus any gain dansed from tha business use of your and shown on Schedue D ar Fom ne, minuS any loss trom the nat derived from the business use of your home and shown on Schedule D or Form 4797, See instructions 9 Casalty losses (see instructions 11 Real eetae 1ax8einstctione 12 Add Ines 9, 10, and 1 5 Subtract ine 14 6 Excess mortgage intnest(ose instruction auto or ร8 Rent 19 Repeirs and maintenance 20 Utities 21 Other epeee instructions 22 Add ines 16 through 21 23 Muitiply Ine 22, column by ine 7 24 Camyover of operating expenses from 2011 Form 8323, Iine 42 Alable operaing eopenees. Emer the smaller of Iine 15 or Ine 25 27 Limt on exoess casualty losmes and deproclaon Subtract line 28 liom line 15 28 Excess 29 Depreclation of your home trom Iine 41 below 31 Add 2ธ through 30 32 Alowable exoss casuaity losses and depreoiation. Emer the smaller of line 27 or ine 31 33 Add i 14, 2, and 3 4Casalty loss partion, any,trom lines 14 and 32. Camry amount to Form 4084 isee intucon 5Alowsble 3 your home 13. Enter here and on Schedule C, le30, I 8 Ener tha smaller of your homausa bas or ita fair markovau 37 value of la 38 Basis of buiding. Subtract line 37 from line 36 instructin) Busnass trasts of building. Mutply ne 38 by ine Part I Caryovar of Unenowomi25.s than aro, enle