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[answered] Below you'll find a tax situation for which you'l

Below you?ll find a tax situation for which you?ll prepare a paper tax return for 2014.? Please reflect on the described circumstances and make an ?informed, supported? choice for your handling of the respective tax issues.

Paul and Donna Decker are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2014.? The Deckers live at 1121 College Avenue, Carmel, IN 46032.? Paul is an assistant manager at Carmel Motor inn and Donna is a teacher at Carmel Elementary School.? They present you with W-2 forms that reflect the following information:

??????????????????????????????????????????????????????????? Paul???????????????????????????? Donna

Salary???????????????????????????????????????????????? $68,000????????????????????? $56,000

Federal tax withheld???????????????????????? 6,770????????????????????????? 6,630

State tax withheld???????????????????????????? 900???????????????????????????? 800

FICA withheld??????????????????????????????????? 5,202????????????????????????? 4,284

Social Security Numbers????????????????? 111-11-1111???????????? 123-45-6789

Donna is the custodial parent of two children from a previous marriage who reside with the Deckers through the school year.? The children, Larry and Jane Parker, reside with their father, Bob, during the summer.? Relevant information for the children follows:

??????????????????????????????????????????????????????????? Larry????????????????????????? Jane

Age????????????????????????????????????????????????????? 17??????????????????????????????? 12

Social Security Numbers????????????????? 123-45-6788???????????? 123-45-6787

Months spent with the Deckers?????? 9????????????????????????????????? 9

Under the divorce decree, Bob pays child support of $150 per month per child during the nine months the children live with the Deckers.? Bob says that he spends $250 per month per child during the summer months they reside with him.? Donna and Paul can document that they provide $2,000 support per child per year.? The divorce decree is silent as to which parent can claim the exemptions for the children.?

In August, Paul and Donna added a suite to their home to provide more comfortable accommodations for Hannah Snyder, 123-45-6786, Donna?s mother, who had moved in with them in February 2014 after the death of Donna?s father.? Not wanting to borrow money for this addition, Paul sold 300 shares of Acme Corporation stock for $50 per share on May 3, 2014, and used the proceeds of $15,000 to cover construction costs.? The Deckers had purchased the stock on April 29, 2009, for $25 per share.? They received dividends of $750 on the jointly-owned stock a month before the sale.

Page 2:? The Deckers? Tax Problem 2015

Hannah, who is 66 years old, received $7,500 in Social Security benefits during the year, of which she gave the Deckers $2,000 to use toward household expenses and deposited the remainder in her personal savings account.? The Deckers determine that they have spent $2,500 of their own money for food, clothing, medical expenses, and other items for Hannah.? They do not know what the rental value of Hannah?s suite would be, but they estimate it would be at least $300 per month.

Interest paid during the year included the following items:

??????????? Home mortgage paid to Carmel Federal Savings and Loan???????? $7,890

??????????? Interest on an Automobile loan from Carmen National Bank???? 1,660

??????????? Interest on Citibank Visa Card???????????????????????????????????????????????????????? 620

In July, Paul hit a submerged rock while boating.? Fortunately, he was uninjured after being thrown from the boat and landing in deep water.? However, the boat, which was uninsured, was destroyed.? Paul paid $25,000 for the boat in June 2013 and its value was $18,000 according to a boat show re-sale listing the month before the accident.

The Deckers paid physician and hospital bills of $10,700 and were reimbursed $2,000 by their insurance company.? They spent $640 for prescription drugs and medicines and $5,904 for premiums on their health insurance policy.? They have filed additional claims of $1,200 with their insurance company and have been told they will receive payment for that amount in January 2015.? Included in the amount paid for physician and hospital bill were payments of $380 for Hannah and $850 for the children.

Additional information of potential tax consequence is listed below:

??????????? Real estate taxes paid?????????????????????????????????????????????? $3,850

??????????? Sales taxes paid per IRS table????????????????????????????????? 1,379

??????????? Cash Contributions to the First Methodist Church?????????? 1,950

??????????? Appraised value of books donated to the

??????????????????????? public library???????????????????????????????????????????????? 740

??????????? Paul?s unreimbursed employee expenses

??????????????????????? to attend a hotel mgmt convention:


??????????????????????? airfare??????????????????????? 340

??????????????????????? hotel?????????????????????????? 170

??????????????????????? meals????????????????????????? 95

??????????????????????? registration??????????????? 340


Page 3:? The Deckers? Tax Problem 2015?

Refund of state income tax for 2013(the Deckers

??????????? itemized on their 2013 tax return)???????????????????????? 1,520

Donna?s career as an elementary school teacher has been challenging for her because she has a high student enrollment in her fifth grade class.? Given that this is also a challenging time for her students, Donna decided to enroll in a class in pre-teen psychology at Brown County Community College.? Tuition cost for the course was $2,500 which Donna covered from her personal funds.? Donna incurred $850 in commuting costs to travel between her home and her designated school.? She personally incurred $650 in costs for instructional supplies that she purchased for use in her classroom.

Donna and Jane decided during the spring that they needed to ?cleanse? their closets of old items before they acquired their new spring/summer wardrobes.? Upon completion of their ?cleansing,? they donated personal property items which would have had a re-sale value at their Goodwill Store of $3,200 to the First Methodist Church for their annual rummage sale.

Paul incurred personal commuting costs of $1,250 for his travel between his home and the Carmel Motor Inn.

Donna wanted to pursue a personal interest in sewing she has had since childhood.?

Paul thought that since she was interested in sewing, she should make an effort to initiate a small, weekend business by offering sewing lessons.? Donna jumped at the idea and immediately secured a storefront in which to conduct her weekend business.? The interest in sewing classes proved to be positive and Donna received $8,000 in class tuition payments from participants.? Her expenses related to offering these lessons consisted of the following items:? studio rent - $2,000, utilities - $750 and fabrics used during the lessons - $1,200.? The facility that Donna rented was already equipped in an instructional layout so all she did was purchase two industrial sewing machines at a total cost of $12,350.00 each.? She decided to claim the maximum amount of depreciation possible for this year because she did not know how long the demand for sewing instruction would last in the local community.?

With the initiation of her business, Donna found it necessary to have childcare for Jane on selected weekends.? The First Methodist Church offered this care and Donna paid $4,000.00 during the year to have Jane in a secure environment while she instructed students.

Needs to be answered in a income tax return form with schedule A and B forms


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