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tax prob - Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 23412, and her Social Security number is


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88. Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 23412, and her Social Security number is 123-45-6789. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1111. Karl lives with Ashley, and she fully supports him. Bill spent 2011 traveling in Europe and was not a college student. He had gross income of $4,655 in 2011.


Ashley owns the Enterprises, LLC sole proprietorship, a data processing service (98-



7654321), which is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2012 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $3,560, meals and entertainment expenses (before the 50% reduction) of $22,000, and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee.


Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year.


Ashley has an extensive stock portfolio and has prepared the following analysis:




Number of






Purchased Date Sold








Per Share


Selling Price






Beige 10 10/18/11 10/11/12 $80 $ 74 $30


Garland 30 10/11/05 10/11/12 43 157 70


Puce 15 3/10/12 8/11/12 62 33 45


NOTE: Ashley received a Form 1099-B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2012.


Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband. His Social Security number is 123-45-6788.


Ashley itemizes her deductions and had the following items, which may be relevant to her return:


Item Amount Comment


Unreimbursed medical expenses for


Ashley (all for visits to doctors) $1,786 Does not include health insurance premiums.


State income taxes paid 1,830


Real property taxes on personal residence 3,230


Interest paid on home mortgage (Form 1098) 8,137 The loan is secured by the residence and was incurred when the home was purchased.


Charitable contributions 940 Cash paid to Ashley’s church.


Sales taxes 619 Amount per sales tax table.


Ashley made a $27,000 estimated Federal income tax payment, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2013 taxes.


Compute Ashley’s net tax payable or refund due for 2012. If you use tax forms for your computations, you will need Form 1040 and its Schedules A, C, D, and SE and


Form 8949. Suggested software: H&R BLOCK At Home.























89. Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through


November 10, 2012, when he was laid off. He received $7,000 of unemployment compensation from November 11, 2012, through December 31, 2012. FICA withholdings were as follows: Social Security of $1,890 ($45,000 × 4.2%) and Medicare of $653 ($45,000 × 1.45%). Justin lives at 112 Green Road, Crown City, OH 45623. His Social Security number is 111-11-1111. Justin owned an apartment building until November 22, 2012, when he sold it for $200,000. For 2012, he had rent revenue of $33,000. He incurred and paid expenses as follows: $4,568 of repairs, $22,000 of mortgage interest, and $1,000 of miscellaneous expenses. He had purchased the building on January 2, 2006, for $125,000. The building generated an operating profit each year that Justin owned it.


Other information follows:


• On November 22, 2012, Justin sold for $3,500 equipment that had been used for repairing various items in the apartments. The equipment was purchased for $25,000 on July 10, 2005, and was fully depreciated prior to 2012.


• Justin has $3,000 of unrecaptured § 1231 losses from prior years.


• Justin is age 38; is single; is divorced; and has custody of his 9-year-old son, Flint. Justin provides more than 50% of Flint’s support. Flint’s Social Security number is 123-45-6789.


• Justin had $1,000 interest income from Blue Corporation bonds.


• Justin had $1,500 interest income from a State Bank certificate of deposit.


• Justin had a $2,000 0%/15% long-term capital gain distribution from the Brown


Stock Investment Fund.


• Justin had the following itemized deductions: $5,600 real estate taxes on his home; $8,900 mortgage interest on his home; $760 charitable contributions (all in cash, properly documented, and no single contribution exceeded $25); $7,300 state income tax withholding during 2012; $2,000 state estimated income tax payments during 2012; $2,600 sales taxes paid.


• Justin does not want to donate to the Presidential Election Campaign Fund.


• He had $12,000 of Federal income tax withholding during 2012 and made total Federal estimated income tax payments of $14,000 during 2012.


Compute Justin’s 2012 net tax payable or refund due. If you use tax forms for your computations, you will need Form 1040 and Schedules A, B, D, and E. You will also need


Form 4797, but ignore Form 6251. Suggested software: H&R BLOCK At Home.


See Appendix E for Comprehensive Tax Return Problems—Form 1040


Paper#39488 | Written in 07-Dec-2015

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