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Karl F. and Jeanne S. Wheat are married and live at 13071 Forestview (all four parts)




Question;Objective;The;objective is to complete, in four successive parts, a comprehensive federal tax;problem of moderate difficulty.;Guidelines;The;Tax Project requires you to complete Appendix E, Problem 1, in four parts. Each;part will have you complete selected paragraphs from the problem.You;must select the appropriate tax forms in doc sharing to complete project.;Part I is worth a possible 25 points.Part II is worth a possible 25 points.Part III is worth a possible 25 points.Part IV is worth a possible 75 points.The;entire Tax Project is worth a total of 150 points.;Part I is due at the end of Week 3.Part II, which includes work you did during Part I, is;due at the end of Week 5 and includes additional items of Appendix E;Problem 1.Part III, which includes the work you did during Parts;I and II, is due at the end of Week 6 and includes additional items of;Appendix E, Problem 1.Part IV includes all previously completed items and;completes the problem in its entirety. Part IV is due at the end of Week;7.After;you have downloaded the Tax Forms from Doc Sharing during Week 2 of the course;you are encouraged to immediately begin completing the Part I (Week 3);assignment.;Please;read the entirety of Appendix E, Problem 1 before beginning to complete;the assignment. It has several paragraphs of instructions.;All;DeVry University policies are in effect, including the plagiarism policy.;Any;questions about this paper may be discussed in the weekly Q & A threaded;discussion topic.;Please;see the Syllabus for the late assignment policies.;Part;I DUE 9/23;For;the Part I (Week 3) assignment, you are asked to use the introductory;sentence about the tax payer and complete paragraph items: 1, 12, 16, and 17.;Do notdo additional work from any other paragraph.;Determine;the forms to be completed. Once completed, save your form(s) as Your Last Name;- formname (e.g., Smith-f2106.pdf). Submit your assignment to the Week 3;Assignments Dropbox.;Note;Optional Tax Software: Please note that DeVry does not provide Tax software to;complete the project. Using software to complete the project is optional and;note required. The forms are provided in doc sharing for your use. However;students that desire to use the software to complete the project have the;following options;H;R Block At Home: The software is included with the purchase of the;hard copy of the textbook. You may use the software disk provided;and follow the installation instructions. You may review the student;companion website or contact the publisher's customer service to obtain;information regarding the purchase of the H&R Block At Home software;online. If purchased and used to complete your project assignment, you;will need to submit the file created by the software.;Save your work as an H&R Block At Home file.Do NOT save the problem as a PDF file.TurboTax;If you purchased TurboTax and completed your assignment as a TurboTax file, you;will need to submit your assignment as a PDF file before submitting it to your;instructor.;Part;II DUE10/7;For;the Part II (Week 5) assignment, you are asked to do the following;Use the Part I assignment you completed previously.Correct your Part I assignment mistakes, if any, based;on the solution you were provided by your instructor at the end of Week 4.Complete the following additional paragraph items;2, 3, 13, and 14..Save;your file as Your Last Name - formname (e.g., Smith-f2106.pdf), and submit it;to your instructor via the Week 5 Assignments Dropbox.;Part;III DUE 10/14;For;the Part III (Week 6) assignment, you are asked to do the following;Use the Parts I and II assignments you completed;previously.Correct your Part II assignment mistakes, if any, based;on the solution you were provided by your instructor at the end of Week 5.Complete the following additional paragraph items: 4;5, 6, and 7.Save;your file as Your Last Name ? formname (e.g., Smith-f2106.pdf), and submit it;to your instructor via the Week 6 Assignments Dropbox.;Part;IV DUE 10/21;For;the Part IV (Week 7) assignment, you are asked to do the following;Use the Parts I, II, and III assignments you completed;previously.Correct your Part III assignment mistakes, if any;based on the solution you were provided by your instructor at the end of;Week 6.Complete the following additional paragraph;items: 8, 9, 10, 11, and 15.Save;your file as Your Last Name - formname.pdf (e.g., Smith-f2106.pdf), and submit;it to your instructor via the Week 7 Assignments Dropbox.;Grading;Rubrics;The;following displays the grading rubric for all four parts of your course;project.;Category;Points;%;Description;Documentation & Formatting;15;10;A quality paper will include all;of the required tax forms.;Organization & Cohesiveness;15;10;The content will be properly;entered into the appropriate section and tax form.;Editing;15;10;A quality paper will be free of;any spelling, punctuation, or grammatical errors. Sentences and paragraphs;will be clear, concise, and factually correct.;Content;105;70;A quality tax return will have the;correct dollar values entered into the correct line items of the tax return.;Total;150;100;A quality paper will meet or;exceed all of the above requirements.;Best Practices;The;following are the best practices in preparing this course project;Indicate that you prepared the return at the bottom of;page 2 of the Form 1040. Disregard the fact that the instructions say;taxpayer prepared Their own tax return.Using the supplied correct tax returns at the end of;Week 4, correct your tax return as necessary and submit your Part II tax;return by the end of Week 5.Using the supplied correct tax returns at the end of;Week 5, correct your tax return as necessary and submit your Part III tax;return by the end of Week 6.Using the supplied correct tax returns at the end of;Week 6, correct your tax return as necessary and submit your Part IV tax;return by the end of Week 7.Additional;hints on preparing the best possible project;Apply a three step process of writing: plan, write, and;complete.Prepare an outline of your research paper before;you go forward.Complete a first draft, and then go back to edit;evaluate, and make any changes required.Question from Appenix E;Appendix E:Comprehensive;Tax Return Problems;PROBLEM 1;Karl F. and Jeanne S. Wheat;are married and live at 13071 Forestview Drive, Columbia, MO 65201. Karl is a;self-employed insurance claims adjuster (business activity code 524290), and;Jeanne is a dietitian for the local school district.;?;1. Karl represents several national casualty;insurance companies on a contract basis. He is paid a retainer and receives;additional compensation if the claims for the year exceed a specified number.;As an independent contractor, he is responsible for whatever expenses he incurs.;Karl works out of an office near his home. The office is located at 1202;Brentwood Avenue. He shares Suite 326 with a financial consultant, and;operating expenses are divided equally between them. The suite has a common;waiting room with a receptionist furnished and paid by the landlord. Karl?s;one-half share of the 2011 expenses he paid is listed below.;Office;rent;$11,600;Utilities;(includes telephone and fax);4,300;Replacement;of waiting room furniture on April 22;3,600;Renters?;insurance (covers personal liability, casualty, and theft);1,400;Office;expense (supplies and postage meter);740;New;Toshiba copier (less trade-in on old machine) on February 7;300;Waiting;room coffee service (catered);280;Waiting;room magazine subscriptions;90;?;For his own business use, Karl purchased a laptop computer for;$2,100 on June 17 and a Nikon camera for $1,200 on February 5. Except for his;vehicle (see item 2), Karl uses the ? 179 write-offoption whenever possible.;?;2. On January 2, 2011, Karl paid $31,000 (including;sales tax) to purchase a gently used Dodge Durango SUV that he uses 92% of the;time for business. No trade-in was involved, and he did not claim any ? 179;expensing. Karl uses the actual operating cost method to compute his tax;deduction, using the 200% declining-balance MACRS depreciation method with a;half-year convention. His expenses relating to the Durango for 2011 are as;follows;Gasoline;$3,100;Auto;insurance;1,500;Interest;on car loan;820;Auto;club dues;225;Oil;changes and lubrication;140;License;and registration;90;In connection with his business use of the Durango, Karl paid $510;for parking and $350 in fines for traffic violations. In 2011, Karl drove the;Durango 14,352 miles for business [8,612 miles between January 1 and June 30;and 5,740 miles between July 1 and December 31] and 1,248 miles for personal;use (which includes his daily round-trip commute to work).;?;3. Karl handles most claim applications locally;but on occasion, he must travel out of town. Expenses in connection with these;business trips during 2011 were $930 for lodging and $1,140 for meals. He also;paid $610 for business dinners with several visiting executives of insurance;companies with whom he does business. Karl?s other business-related expenses;for 2011 are listed below.;?;Contribution;to H.R. 10 (Keogh) retirement plan;$8,000;Premiums;on medical insurance covering family (spouse and children);4,600;Premiums;on disability insurance policy;(pays;for loss of income in the event Karl is disabled and cannot work);2,400;State;and local occupation fee;450;Birthday;gift for receptionist;($25;box of Godiva chocolates plus $3 for gift wrap);28;?;4. Jeanne earns $32,000 as a registered dietician;for the Columbia School District. The job she holds, manager of the school;lunch program, is not classified as full time. Consequently, she is not;eligible to participate in the teacher retirement or health insurance programs.;Jeanne?s expenses for 2011 are summarized as follows;?;Contribution;to traditional IRA;$4,000;Job;hunting expense;720;Continuing;education program;350;Membership;dues to the National Association of Dietitians;120;Subscription;to Nutrition Today;90;To work full-time and earn a larger salary, Jeanne applied for a;position as chief dietitian for a chain of nursing homes. According to the;director of the recruiting service Jeanne hired, the position has not yet been;filled and Jeanne is one of the leading candidates. The continuing education;program was sponsored by the National Association of Dietitians and consisted;of a one-day seminar on special diets for seniors. Out of a total of 8,670;miles driven for the year, Jeanne drove the family Chevrolet Malibu 930 miles;on job-related use. She drove 410 miles between January 1 and June 30 and the;remaining 520 miles between July 1 and December 31. The Wheats purchased the;car on July 11, 2009, for $23,400. Jeanne uses the automatic mileage method for;computing any available deduction for business use of the car.;?;5. The Wheats have supported Gene Isaacson;Jeanne?s widowed father, for several years, appropriately claiming him as a;dependent for tax purposes. On December 27, 2010, Gene suffered a massive stroke.;The doctors did everything they could for Gene, but he died in the intensive;care unit of St. Mary?s Memorial Hospital on January 8, 2011. The Wheats paid;the following expenses on behalf of Gene: $11,800 medical ($6,000 incurred in;2010 and $5,800 in 2011) and $5,300 funeral. [The Wheats? medical insurance;(see item 3) does not cover parents.] These expenses were paid in January and;February 2011. Gene?s will named Jeanne as executor and sole heir of the;estate.;?;6. Upon the advice of the financial consultant;who shares office space with Karl, the Wheats decided to convert Gene?s home;into a furnished rental house. After several minor repairs (e.g., touching up;the paint on the interior walls, replacing various window screens, and;pressure-washing the brick exterior), the property was advertised for rent in;the classified section of the local newspaper on March 1, 2011. The repairs;cost $720, and the newspaper ad was $360. Based on reconstructed records and;appraisal estimates, information about the property is as follows;Original;Cost;FMV;1/8/11;House;$40,000;$220,000;Land;10,000;50,000;Furniture;and appliances;21,000;14,000;?;7. Gene?s former residence was rented almost;immediately, with occupancy commencing April 1, 2011, under the following terms;one-year lease, $2,400 per month, first and last month?s rent in advance;$2,000 damage deposit, and lawn care, but not utilities, included. The tenant;complied with all terms except that the December rent payment was not made;until January 1, 2012?the tenant took an extended Christmas holiday trip.;Expenses in connection with the property were as follows: property taxes;$2,600, repairs, $320, lawn maintenance, $540, insurance, $1,800, and street;paving assessment, $2,100. The property is located at 12120 Barrington Avenue;Columbia, MO 65201. (Note: If you are using H&R Block;At Home, input 365in the ?days owned? box and in the ?days rented?;box. Otherwise, the program will apportion the expenses inappropriately).;?;8. In early December 2010, a friend advised Karl;to buy stock in Pioneer Aviation Inc. (PAI). At that time, PAI was in serious;financial straits and was headed toward bankruptcy. Nevertheless, according to;Karl?s friend, the value of the corporation?s underlying assets was such that;the shareholders were bound to recover considerably more than the current;market price of $0.50 per share. Excited at the chance for a ?sure? profit, on;December 15, 2010, Karl purchased 20,000 shares for $10,000. In September 2011;the trustee in bankruptcy announced that the stock was worthless and that even;some of PAI?s preferred creditors would not be paid.;?;9. On June 14, 2011, the Wheats sold 500 shares;of Garnet Corporation for $17,500 ($35 per share). They owned 1,000 shares;acquired as follows: 500 shares on November 5, 2007, for $25 a share and 500;shares on August 5, 2009, for $30 a share. The Wheats did not instruct their;broker as to which 500 shares to sell.;?;10. One month before she died on April 14, 2002;Violet Isaacson (Jeanne?s mother) gave Jeanne a coin collection. Based on;careful records that Violet kept, the collection had a cost basis of $9,000 and;a fair market value of $18,000 at the time Violet passed away. On February 12;2011, the Wheat residence was burglarized, and the coin collection was stolen.;The Wheats filed a claim for $24,000 (the current value of the collection) with;the carrier of their homeowner?s insurance policy. All they were able to;collect, however, was $10,000, which was the maximum amount allowed for;valuables (e.g., jewelry and antiques) without a special rider.;?;11. In her will, Violet Isaacson (see item 10);left Jeanne a vacant lot on Joplin Road. Violet had paid $15,000 for the;property, and it had a value of $19,000 when she died. Violet had purchased the;lot because it was adjacent to a school that she expected would expand. By;2011, it has become clear that the Joplin Road area of Columbia is not growing;and that no school expansion will take place. Consequently, on July 1, 2011;Jeanne sold the lot for $19,000. Not included in this price are back property;taxes (and interest on the underpaid taxes) of $700 on the lot, which the;purchaser assumed and later paid.;?;12. Every year around Christmas, Karl receives;cards from various car repair facilities (including dealerships), expressing;thanks for the business referrals and enclosing cash. Karl has no arrangement;contractual or otherwise, that requires any compensation for the referrals he;makes. Concerned about the legality of such ?gifts,? Karl had previously;consulted an attorney about the matter. Without passing judgment on the status;of the payors, the attorney found that Karl?s acceptance of the payments does;not violate state or local law. Karl sincerely believes that the payments he;receives have no effect on the referrals he makes. During December 2011, Karl;received cards containing $7,200. One card containing $900, however, was;delayed in the mail and was not received by Karl until January 4, 2012.;?;13. In addition to those previously noted, the;Wheats? receipts during 2011 are summarized below.;?;Payments;to Karl for services rendered (as reported on Forms 1099 issued by several;payor insurance companies) pursuant to contractual arrangement;$82,000;Income;tax refunds for tax year 2010;Federal;210;State;90;Interest;income;State;of Missouri general-purpose bonds;1,400;GE;corporate bonds;1,100;Certificate;of deposit at Columbia National Bank;900;Qualified;dividends (Duke Energy);$ 600;Proceeds;from garage sale (see item 14);9,200;Cash;gifts from Karl?s parents;24,000;Karl?s;net state lottery gains (winnings, $1,000, losses, $900);100;?;14. On June 2 and 3, 2011, the Wheats held a;garage sale to dispose of unwanted furniture, appliances, books, bicycles;clothes, and a boat (including trailer). The estimated basis of the items sold;is $25,500. All were personal use property.;?;15. Expenditures during 2011, not mentioned;elsewhere, are as follows;Medical?;Copayment;portion of medical expenses;$1,300;Dental;(orthodontist);1,200;Taxes?;State;income tax (see item 17);3,456;State;sales taxes;1,120;Property;taxes on personal residence;3,800;Interest;on home mortgage reported on Form 1098;4,200;Charitable;contributions;3,600;?;The Wheats? medical insurance does not cover dental services. The;Wheats pledge contributions of $1,200 per year to their church. In 2011, they;paid the pledges for 2010?2012. During 2011, the Wheats drove the Malibu 270;miles for medical purposes?150 miles in the first half of the year and 120;miles in the second half (e.g., trips to the hospital and doctor and dentist;offices)?and 320 miles for charitable purposes?140 miles in the first half of;the year and 180 miles in the second half (delivering meals to the poor under a;church-sponsored program).;?;16. The Wheats have two sons who live with them;Trace and Trevor. Both are full-time students. Trace is an accomplished singer;and made $4,200 during the year performing at special events (e.g., weddings;anniversaries, and civic functions). Trace deposits his earnings in a savings;account intended to help cover future college expenses.;?;17. The Form W?2 Jeanne receives from her employer;reflects wages of $32,000. Appropriate amounts for Social Security and Medicare;taxes were deducted. Income tax with-holdings were $1,320 for Federal and;$1,056 for state. The Wheats made quarterly tax payments of $2,200 for Federal;and $600 for state on each of the following dates: April 15, 2011, June 15;2011, September 15, 2011, and January 15, 2012. Relevant Social Security;numbers are provided below.;Name;Social Security Number;Birth Date;Karl F. Wheat;111?11?1111;06/06/1969;Jeanne S. Wheat;123?45?6781;08/14/1970;Gene Isaacson;123?45?6784;03/12/1934;Trace Wheat;123?45?6788;09/13/1993;Trevor Wheat;123?45?6789;07/20/1991


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