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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:

 

Employer

 

Alternative

 

Energy Gross Wages

 

$118,325 Federal Income

 

State Income

 

Tax Withholding Tax Withholding

 

$29,230

 

$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

 

$32,000

 

Jensen?s Health Products

 

$8,500

 

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:

 

Consultant-related:

 

Airfare

 

Hotel

 

Meals

 

Parking $2,900

 

$1,450

 

$390

 

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

 

documentation to verify) Board of Director-related:

 

Meals

 

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

 

Interest

 

Interest

 

Interest income

 

income

 

income

 

income from

 

from

 

from

 

from First Bank of New Jersey

 

$320

 

Patterson, New Jersey School District $200

 

U.S. Treasury Bond

 

$350

 

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

 

$750

 

$200

 

$425

 

$140

 

$190

 

$225

 

$200

 

$275

 

$350

 

$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

 

7/1/15

 

Sold 75 shares of Apple, Inc.

 

4/15/15

 

Sold 350 shares of Cooper Tire

 

10/14/15

 

Sold 1,000 shares of Cardinal Health

 

9/3/15

 

Sold 50 shares of Union Pacific

 

1/7/15

 

Purchased 100 shares of Procter & Gamble

 

7/10/15

 

Purchased 350 shares of Cooper Tire

 

11/1/15

 

Purchased 350 shares of PepsiCo

 

5/14/15

 

Purchased 300 shares of Kellogg

 

10/14/15 $22,500

 

$28,750

 

$14,700

 

$35,000

 

$2,750

 

$7,700

 

$14,000

 

$32,000

 

$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

 

entity.

 

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

 

$7,525

 

$1,250

 

$12,550

 

$600

 

4 Contribution to United Way

 

$2,000

 

Contribution to American Cancer Society

 

$5,000

 

Contribution to neighborhood drive to oppose development project

 

$500

 

Contribution to the Temple Mount Synagogue

 

$12,000

 

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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