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[answered] ACC 5170/7120 FALL 2016 Tax Return Project PART II Please c

prepare form1040 and schedulea, e, se and any nessary worksheet.

ACC 5170/7120


FALL 2016


Tax Return Project PART II


Please complete the 2015 federal income tax return. Ignore the requirement


to attach any outside forms to the front page of the Form 1040 (for example


W-2's). If required information is missing, use reasonable assumptions to fill


in the gaps. NOTE: Part I information is repeated.


Joseph and Diana Carroll live in Cherry Hill, New Jersey. Joseph is the VicePresident of Sales at a small start-up company. Diana is a former advertising


executive who currently consults with former clients. She also serves on the


board of directors of an advertising company. The Carrolls have three


children Rebecca (age 18), Alan (age 15), and David (age 12). In January,


Rebecca left home to attend a liberal arts college. All three children qualify


as Joseph and Diana?s federal income tax dependents. The Carrolls plan to


file a joint tax return. The Carrolls provided the following information: Joseph?s social security number is 598-94-2583 Diana?s social security number is 301-52-2942 Rebecca?s social security number is 887-44-8710 Alan?s social security number is 810-42-9092 David?s social security number is 855-11-3021 The Carroll?s mailing address is 85 North Maple Drive, Cherry Hill, New


Jersey 08233


Joseph Carroll reported the following the following information relating to his


employment during the year:






Energy Gross Wages


$118,325 Federal Income


State Income


Tax Withholding Tax Withholding




$14,400 The above amounts do not reflect any income items described below.


Joseph?s employer withheld all payroll taxes it was required to withhold. The


entire Carroll family was covered by minimum essential health insurance


during each month in 2014. The insurance was provided by Joseph?s


employer, Alternative Energy.


Diana Carroll received the following revenue during the year (she uses the


cash method of accounting).


Consulting revenue reported to her on a Form 1099-MISC, Box 7


High-end Retail




Jensen?s Health Products




1 Strategic Solutions $3,750 Board of director compensation reported to her on a Form 1099-MISC,


Box 7


Natural Sunshine, Inc. $6,500 During the year, Diana paid the following business expenses:










Parking $2,900






$320 Diana drove 290 business miles for her consulting-related activities (she has


documentation to verify) Board of Director-related:




Hotel $125


$225 Diana drove 315 business miles for her board of director activities (she has


documentation to verify)


Neither of Diana?s business activities s required the filing of Form(s) 1099 to


report payments she made during the tax year. In addition, Ms. Carroll drove


a 2012 Lexus purchased on January 1, 2012 for all of her business mileage.


She drove the vehicle a total of 10,605 miles during the year for all purposes.


Diana has written documentation to support the mileage amounts. She also


has access to another vehicle for personal purposes.


The Carrolls also received the following during the year:








Interest income






income from






from First Bank of New Jersey




Patterson, New Jersey School District $200


U.S. Treasury Bond




General Mills corporate bond


$400 2 Qualified dividend income from Rio Tinto


Qualified dividend income from Microsoft


Qualified dividend income from Cooper Tire


Qualified dividend income from Cardinal Health


Qualified dividend income from Union Pacific


Qualified dividend income from Procter & Gamble


Qualified dividend income from PepsiCo


Qualified dividend income from Kellogg


Qualified dividend income from Abbott Labs


Qualified dividend income from 3M


Dividend income (not qualified) from China Fund $1,500




















$2,000 The Carrolls did not own, control or manage any foreign bank accounts nor


were they a grantor or beneficiary of a foreign trust during the tax year.


The Carrolls had the following activity in their brokerage account during the


year (all transactions were reported on a Form 1099-B. Basis information on


each stock sale was reported to the IRS):


Sold 2,000 shares of Microsoft




Sold 75 shares of Apple, Inc.




Sold 350 shares of Cooper Tire




Sold 1,000 shares of Cardinal Health




Sold 50 shares of Union Pacific




Purchased 100 shares of Procter & Gamble




Purchased 350 shares of Cooper Tire




Purchased 350 shares of PepsiCo




Purchased 300 shares of Kellogg


10/14/15 $22,500
















$21,000 Relevant tax basis/holding period information related to sales of securities in


the current year:


Purchased 2,000 shares of Microsoft on 5/1/15 for $21,000


Purchased 200 shares of Apple, Inc. on 3/8/2012 for $90,000


Purchased 300 shares of Cooper Tire on 1/12/2011 for $9,000


Purchased 50 shares of Cooper Tire on 6/28/15 for $2,000


Received 1,000 shares of Cardinal Health from Diana?s father as a gift on


10/10/98. Her father?s basis in the stock at the time of the gift was $7,000.


Fair market value of the stock at the date of the gift was $41,000


Purchased 100 shares of Union Pacific on 9/5/13 for $6,000


The Carrolls have a $43,000 long-term capital loss carryover from their prior


tax year.


The Carrolls received a New Jersey state income tax refund of $400 in May of


2014. The Carrolls received the refund because they had overpaid their New


3 Jersey state individual income tax in 2014. On their 2014 Federal income tax


return, the Carrolls deducted and received tax benefit for all of the state tax


income taxes they paid in 2014.


Diana is a 10% owner in an advertising agency named Bright Ideas (?BI?)


(EIN 20-1234567). BI is a Subchapter S corporation. The company reported


ordinary business income for the year of $150,000. Diana received a K-1


from BI reporting her allocation of this business income. Sarah acquired the


stock several years ago. Her basis in the stock before considering her 2015


income allocation was $92,000. Sarah is a passive owner with respect to this




Diana is also a 20% owner in Natural Sunshine, Inc. (?NS?) (EIN 24-9876543).


NS is a Subchapter S corporation. The company reported an ordinary


business loss for the year of ($80,000). Diana received a K-1 from BI


reporting her allocation of this business loss. Sarah acquired the stock


several years ago. Her basis in the stock before considering her 2015 loss


allocation was $45,000. Sarah is a passive owner with respect to this entity.


Joseph received 5,000 shares of restricted (common) stock from his employer


on July 1, 2015. The terms of the restricted stock grant are such that if


Joseph is still employed by Alternative Energy on July 1, 2019 the entire


5,000 shares will vest and become his property. Joseph, upon the advice of


his tax advisor, prepared and filed an IRC Section 83(b) election on July 8,


2015. On July 1, 2015, shares were valued at $5 per share. Joseph


estimates the value of the shares in five years will be at least $150 per


share. Joseph notified Alternative Energy about the IRC Section 83(b)


election in a timely manner. None of the income tax consequences of this


restricted stock grant was included in the $118,325 reported as part of


Joseph?s gross wages (see above).


In May, Joseph was injured in a home accident. The injury prevented Joseph


from working for about a month. During this time, Joseph received $15,000


in disability payments attributable to a disability insurance policy. The


disability policy premiums were paid on Joseph?s behalf as a nontaxable


fringe benefit.


The Carrolls paid the following expenses during the year:


Dentist (unreimbursed by insurance)


Doctors (unreimbursed by insurance)


Prescriptions (unreimbursed by insurance)


Real property taxes on residence


Vehicle property tax based upon value


Mortgage interest on principal residence


Margin interest paid to broker $1,500


$ 2,425


$ 675










4 Contribution to United Way




Contribution to American Cancer Society




Contribution to neighborhood drive to oppose development project




Contribution to the Temple Mount Synagogue




Fee paid to Mouser, Johnson, and Hintze CPAs for tax preparation $450


The Carrolls also donated clothing, electronics, furniture and other household


goods to the Salvation Army of Pleasantville, New Jersey on April 15, 2015.


Estimated thrift value of the goods donated was $275.


Miscellaneous Information


On September 1, the Carrolls paid $200 in foreign taxes attributable to the


dividend received from the China Fund.


The Carrolls would like to contribute to the Presidential Election Campaign.


The Carrolls would also like to receive a refund (if any) of tax they may have


overpaid for the year. Their preferred method of receiving the refund is by


check. 5


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