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ACC - Tax Return Project - Paul J. and Judy L. Vance




Question;Tax Return ProjectRequired:Use the following information to complete Paul and Judy Vances 2011 federalincome tax return. If information is missing, use reasonable assumptions to fillin the gaps. You may need the following forms and schedules to complete the project:Form 1040, Schedule A, Schedule B, Schedule C, Schedule D, Schedule E,Schedule SE, Form 2106-EZ, Form 4562 (for the dental practice), Form 4562(for the rental property), Form 4797, and Form 8863. The forms, schedules,and instructions can be found at the IRS Web site ( Theinstructions can be helpful in completing the forms.Facts:1. Paul J. and Judy L. Vance are married and file a joint return. Paul is self-employedas a dentist, and Judy is a college professor. Paul and Judy havethree children. The oldest is Vince who lives at home. Vince is a law studentat the University of Cincinnati and worked part-time during the year, earning$1,500, which he spent for his own support. Paul and Judy provided $6,000toward Vinces support (including $4,000 for Vinces fall tuition). They alsoprovided over half the support of their daughter, Joan, who is a full-timestudent at Edgecliff College in Cincinnati. Joan worked part-time as an independentcontractor during the year, earning $3,200. Joan lived at home untilshe was married in December 2011. She filed a joint return with her husband,Patrick, who earned $20,000 during the year. Jennifer is the youngest andlived in the Vances home for the entire year. The Vances provide you with thefollowing additional information:Paul and Judy would like to take advantage on their return of anyeducational expenses paid for their children.The Vances do not want to contribute to the presidential electioncampaign.The Vances live at 621 Franklin Avenue, Cincinnati, OH 45211.Pauls birthday is 3/5/1957 and his Social Security number is 333-45-6666.Judys birthday is 4/24/1960 and her Social Security number is 566-77-8888.Vinces birthday is 11/6/1988 and his Social Security number is576-18-7928.Joans birthday is 2/1/1992 and her Social Security number is 575-92-4321.Jennifers birthday is 12/12/1999 and her Social Security number is613-97-8465.The Vances do not have any foreign bank accounts or trusts.2. Judy is a lecturer at Xavier University in Cincinnati, where she earned $30,000.The university withheld federal income tax of $3,375, state income tax of$900, Cincinnati city income tax of $375, $1,260 of Social Security tax and$435 of Medicare tax. She also worked part of the year for Delta Airlines.Delta paid her $10,000 in salary, and withheld federal income tax of $1,125,state income tax of $300, Cincinnati city income tax of $125, Social Securitytax of $420 and Medicare tax of $145.3. The Vances received $800 of interest from State Savings Bank on a jointaccount. They received interest of $1,000 on City of Cincinnati bonds theybought in January with the proceeds of a loan from Third National Bank ofCincinnati. They paid interest of $1,100 on the loan. Paul received a dividendof $540 on General Bicycle Corporation stock he owns. Judy received a dividendof $390 on Acme Clothing Corporation stock she owns. Paul and Judyreceived a dividend of $865 on jointly owned stock in Maple Company. All ofthe dividends received in 2011 are qualified dividends.4. Paul practices under the name Paul J. Vance, DDS. His business is located at645 West Avenue, Cincinnati, OH 45211, and his employer identification numberis 01-2222222. Pauls gross receipts during the year were $111,000. Paul usesthe cash method of accounting for his business. Pauls business expenses are asfollows:AdvertisingProfessional duesProfessional journalsContributions to employee benefit plansMalpractice insuranceFine for overbilling State of Ohio for workperformed on welfare patientInsurance on office contentsInterest on money borrowed to refurbish officeAccounting servicesMiscellaneous office expenseOffice rentDental suppliesUtilities and telephoneWagesPayroll taxes$ 1,2004903602,0003,2005,0007206002,10038812,0007,6723,36030,0002,400In June, Paul decided to refurbish his office. This project was completed and theassets placed in service on July 1. Pauls expenditures included $8,000 for newoffice furniture, $6,000 for new dental equipment (seven-year recovery period),and $2,000 for a new computer. Paul elected to compute his cost recoveryallowance using MACRS. He did not elect to use 179 immediate expensing,and he chose to not claim any bonus depreciation.5. Judys mother, Sarah, died on July 2, 2006, leaving Judy her entire estate.Included in the estate was Sarahs residence (325 Oak Street, Cincinnati, OH45211). Sarahs basis in the residence was $30,000. The fair market value of theresidence on July 2, 2006, was $155,000. The property was distributed to Judyon January 1, 2007. The Vances have held the property as rental property andhave managed it themselves. From 2007, until June 30, 2011, they rented thehouse to the same tenant. The tenant was transferred to a branch office inCalifornia and moved out at the end of June. Since they did not want to botherfinding a new tenant, Paul and Judy sold the house on June 30, 2011. Theyreceived $140,000 for the house and land ($15,000 for the land and $125,000 forthe house), less a 6 percent commission charged by the broker. They haddepreciated the house using the MACRS rules and conventions applicable toresidential real estate. To compute depreciation on the house, the Vances hadallocated $15,000 of the propertys basis to the land on which the house islocated. The Vances collected rent of $1,000 a month during the six monthsthe house was occupied during the year. They incurred the following relatedexpenses during this period:Property insuranceProperty taxesMaintenanceDepreciation (to be computed)$500800465?6. The Vances sold 200 shares of Capp Corporation stock on September 3,2011, for $42 a share (minus a $50 commission). The Vances received thestock from Pauls father on June 25, 1980, as a wedding present. Paulsfather originally purchased the stock for $10 per share in 1967. The stockwas valued at $14.50 per share on the date of the gift. No gift tax was paidon the gift.7. Judy is required by Xavier University to visit several high schools in the Cincinnatiarea to evaluate Xavier University students who are doing their practice teaching.However, she is not reimbursed for the expenses she incurs in doing this. Duringthe spring semester (January through April 2011), she drove her personal automobile6,800 miles in fulfilling this obligation. Judy drove an additional 6,700 personalmiles during 2011. She has been using the car since June 30, 2010. Judy usesthe standard mileage method to calculate her car expenses.8. Paul and Judy have given you a file containing the following receipts for expendituresduring the year:Prescription medicine and drugs (net of insurance reimbursement)Doctor and hospital bills (net of insurance reimbursement)Penalty for underpayment of last years state income taxReal estate taxes on personal residenceInterest on home mortgage (paid to Home State Savings & Loan)Interest on credit cards (consumer purchases)Cash contribution to St. Matthews churchPayroll deductions for Judys contributions to the United WayProfessional dues (Judy)Professional subscriptions (Judy)Fee for preparation of 2010 tax return paid April 14, 2011$3762,468154,7628,2505953,0801503252455009. The Vances filed their 2010 federal, state, and local returns on April 14, 2011.They paid the following additional 2010 taxes with their returns: federal incometaxes of $630, state income taxes of $250, and city income taxes of $75.10. The Vances made timely estimated federal income tax payments of $1,500 eachquarter during 2011. They also made estimated state income tax payments of$300 each quarter and estimated city income tax payments of $160 each quarter.The Vances made all fourth-quarter payments on December 31, 2011. They wouldlike to receive a refund for any overpayments.


Paper#39285 | Written in 18-Jul-2015

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