Marvin L. and Molly S. Hall are married and live at 310 Poplar Ave., Fort Wayne, IN 46802. They file a joint return and are calendar year, cash basis taxpayers. 1. Marvin is a self-employed claims adjuster (professional activity code is 52490) for several major casualty insurance companies. He maintains an office at 4230 Peony St., STE 130, Fort Wayne, IN 46802. He shares the suite with several other professionals and has no employees. A receptionist handles all calls and is provided by the landlord as a part of the services offered to tenants. Marvin?s work-related expenses for 2010 are as follows: Office rent $8,100 Utilities 3000 Accounting services 1,200 Office expenses (supplies, use of copier, etc.) 1,100 Legal services (see item 8 below) 300 State and local license fees 900 Renter?s insurance (covers personal liability, casualty, theft) 1,500 Replacement of reception room furnishings (6/5/2009) 2,200 Professional dues and subscriptions and trade publications 400 Business lunches 1,400 Contribution to H.R. 10(Keogh) plan 8,000 Medical insurance premiums 5,000 The business meals Marvin paid for were to entertain various visiting executives from the insurance companies he does business with. As is the case with all of Marvin?s business transactions, the lunches are properly documented and supported by receipts. Because the reception room furnishings were looking shabby, Marvin and his suite-mates had them replaced. The $2,200 Marvin spent was his share (i.e., sofa and coffee table) of the cost. Marvin follows a policy of avoiding depreciation by utilizing the ?179 election to expense assets. All of Marvin?s office equipment (e.g., desk, chairs, file cabinets, computer, etc.) have previously been expensed. Of 10,000 total miles in 2010, Marvin drives his car (a ford explorer purchased on 6/1/2007) 3,200 miles for business (not including commuting) and has business parking and toll charges of $310. The Halls use the automatic mileage method of claiming automobile expenses. 2. Molly is a registered nurse employed on a part-time basis by Home Care Services. She generally is assigned to provide medical services at the residences of patients recently discharged from the hospital. Her employer does not provide her with an office, and she has no separate office in her home. She does, however, maintain her business records at home and lists it as her business address. After receiving her assignments by phone, she drives the family Buick (purchased 7/1/2005) directly to the residence of the patient. Home Care Services requires all of its nurses to wear uniforms while on duty. As Molly is not a full-time employee, she is not covered by Home Care?s health or retirement plans. Molly?s work-related expenses for 2010 appear below: Mileage (total Buick miles in 2010=10,000) 3,000 miles Professional dues and subscriptions $180 Continuing education programs (required to maintain license) 320 Annual license fee 150 Nursing supplies (e.g., masks, gloves) 260 Uniforms purchased (including $240 for shoes) 410 Laundering of uniforms 210 3. at a foreclosure sale on May 8, 2010 the Halls purchased a house to be held as a rental investment. The property cost $300,000 (of which $40,000 is allocated to the land) and is located at 2320 Cardinal Rd. Elkhart, IN 46515. After making minor repairs and placing the property in service on June 1, the Halls were fortunate in that they were able to rent it immediately for $1,500 a month (payable on the 1st of each month). Information regarding the rental property for 2010 is summarized below: rent received ($1,500 x 8 months) $12,000 refundable damage deposit 2,000 property taxes 1,800 interest on mortgage 1,500 repairs 400 insurance 2,500 street paving assessment 1,200 Although the property was rented for only seven months, in late December 2010 the tenants prepared the January 2011 rent because they were going to be out of town on New Year?s Day. The special assessment was levied by the city of Elkhart to resurface the street in front of the house. The Halls plan to use MACRS straight-line depreciation, assuming the mid-month convention. 4. On her birthday on May 9, 2002, Molly received from her father unimproved land located in Marshall County (IN). The land cost her father $20,000 in 1970 and had a value of $90,000 on the date of the gift. No gift tax was due as a result of transfer. on may 2010 , molly sold the land to an adjoining property owner for $100,000. Under the terms of the sale Molly received a down payment of $10,000 and six notes maturing annually for $15,000 each with interest payable at the rate of 8%. Molly did not elect out of the installment method. 5. When molly?s father died in 2009 he had a life insurance policy issued by Condor Assurance with a maturity value of $100,000. As the designated beneficiary of the policy, Molly picked a settlement option of $23,000 annually, payable over 5 years . In 2010 she received a check from Condor for $23,000. 6. Based on a tip from a friend who is an investment adviser, on November 6 2009, Marvin purchased 14,000 shares of common stock in Eagle Corporation for $14,000. Eagle, a manufacturer of auto parts was experiencing financial difficulties and was contemplating bankruptcy. Nevertheless, the adviser was sure that its liquidation value would far exceed the cost of stock. Eagle went into receivership in early March 2010 and by October 15 of this year , it was determined that the common stock was worthless. 7. in July 2010, the Hall?s state income tax returns for 2007 and 2008 were audited by the Department of Revenue. A no-change determination was made for 2007, but the audit resulted in additional assessment of $300 for 2008. Marvin immediately paid this amount to the state of Indiana. 8. besides those previously noted the Halls had the following receipts for 2009: payment for services rendered as a claims adjuster (as supported on Forms 1099 issued by several payor insurance companies) $72,000 Nursing wages (from W-2 issued by home care services) $39,000 Cash payments received by Marvin from numerous repair facilities and building contractors that he deals with frequently 10,500 Income tax refund for year 2009 where federal is $1200 and state is 350 so total is $1,550. interest income : city of South Bend bonds 900, interest on Wells Fargo Bank CD 800. So total interest is 1700. Garage sale 4,200. Loan repayment 20,000. The cash payments were delivered to Marvin during the charismas season by special courier. They were enclosed in an envelope marked ?GIFT? with a note expressing thanks for the business referrals. No arrangement exists contractual or otherwise that requires Marvin to be compensated for any referrals he makes. Although Marvin realizes that kick-backs are not uncommon in the repair business he was concerned about the legality of the procedure. During 2010 he retained an attorney, who shares his suite, to research the matter. Without passing judgment on the status of the payors the attorney found that Marvin?s acceptance of the payments does not violate any state or local laws. Since he is a friend, the attorney charged Marvin a modest fee of $300 for his advice. (see above). The garage sale involved mostly items molly inherited from her father (e.g. boat, and trailer, camper, hunting and fishing equipment). Molly has no proof as to the cost of these assets, nor does she know their value at the time of his death (no estate tax return had to be filed). 3 years ago Marvin had loaned his younger sister Marcie $20,000 to help start a business. No note was signed no interest was provided for and no due date was specified. Marcie repaid the loan in 2010. Not mentioned above were 2 tickets the Halls won ion tin a church raffle the tickets to an Indianapolis opera benefit performance were worth $240 but cost the church only $100. the halls accepted the tickets but no one wanted to attend. 9. in addition to any items previously mentioned the Halls had the following expenses for 2010 Medical and dental expenses not covered by insurance 8000 Ad valorem property tax on personal residence 5,200 Interest: Home mortgage 3,800 Interest on home equity loan 1,200 So total interest 5,000 Charitable contributions 3000 Tax return preparation fee (60% relates to Marvin?s business) 400. Of the 8000 in medical expenses 5000 was used to pay for Zo? Hall?s gallbladder operation. Zo? is Marvin?s mother who lives with them and would otherwise qualify as their dependant except for the gross income test. During 2010 molly borrowed $20,000 under a home equity loan arrangement. The money was used to help pay family credit card debt and to help pay for her younger sister Clara?s wedding. 10. Besides Zo?, the Hall?s household includes their 3 children: Dale (age 17), Dana (age 16), and Kirk (age 14). All are full-time students. Dale earned 4,400 during the year. 11. Molly?s W-2 form from Home Care Services shows $200 withheld for Federal income tax and $941 for state. Marvin made equal quarterly payments of 2600 Federal and 500 state. SS#s and birthdays are below Marvin L. Hall 123-45-6789 07/01/1968 Molly S Hall 123-45-6782 02/20/1969 Dale Hall 123-45-6788 04/09/1993 Dana Hall 123-45-6783 12/06/1994 Kirk Hall 123-45-6781 07/29/1996 Zo? Hall 111-11-1111 01/03/1940 Requirements: Prepare an income tax return (with appropriate schedules) for the halls for 2010. In doing this use these guidelines: make necessary assumptions for information not given in the problem but needed to complete the return. Be aware of the possible application of certain tax credits. The Halls do not wish to contribute to presidential election campaign .In the past years the Halls have itemized the deductions. "
Paper#4488 | Written in 18-Jul-2015Price : $25