Noah and Joan Arc?s Tax Return;Noah and Joan Arc live with their family at 4342 Josie Jo, Santee, CA 92071. Noah?s Social;Security number is 434-11-3311, Joan?s is 456-87-5432. Both are in their mid-30s and;enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a?re-;?ghter for the city.;1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-;2345), who is 7 years old, and a daughter named Mary Sue (Social Security number;554-33-2411), who is 4 years old. The Arcs paid $2,800 to the Roundup Day Care;Center to take care of Mary Sue while they worked. Because Joan is a?re?ghter, she;was home in the afternoon to care for Billie Bob after school.;2. For the current year, Joan?s W-2 from the city?re department is located on page D-4.;Noah made estimated federal income tax payments of $12,000 and estimated state;income tax payments of $1,000 during the current year.;3. Noah?s pet store is located at 18542 Mission Road, Santee, CA 92071. The name of;the store is ??The Arc,?? and its taxpayer ID number is 95-9876556. The beginning;inventories and ending inventories are both $10,000. The revenue and expenses for the;year are as follows;Sales Revenue (merchant card sales) $ 144,000;Expenses;Cost of Sales $62,000;Insurance 750;Accounting fees 1,800;Wages 25,000;Payroll taxes 2,250;Utilities 2,700;Rental expense 7,200;Total Expenses (101,700);Net Income $ 42,300;4. Noah and Joan paid the following amounts during the year (all by check);Political contributions $ 250;Church donations (for which a written;acknowledgment was received)2,300;Real estate taxes on their home 1,200;Mortgage interest for purchase of home See Form 1098 (page D-5);Tax return preparation fees 350;Credit card interest 220;Automobile insurance premiums 600;Uniforms for Joan 125;5. Noah likes to invest in the stock market. His Form 1099-B showed the following;information for Noah?s stock sales;Stock Date Acquired Date Sold Sales Price Cost Basis;Blue Co. 02/11/03 08/15/12 $ 4,500 $2,300;Yellow Co. 01/31/12 06/05/12 6,000 5,000;Red Co. 10/02/04 10/07/12 12,000 1,600;The expenses of sale are included in the cost basis. Noah has a long-term capital;loss carryover from last year of $2,300.;6. During the year, Noah and Joan received the following qualifying dividends;Exxon $320;Texas Utilities 220;Coca-Cola See 1099-DIV (page D-4);All stocks, bonds, and savings accounts were purchased or established with com-;munity property.;7. Noah and Joan own rental property located at 6431 Gary Ct., San Diego, CA 92115.;The revenue and expenses for the year are as follows;Rent Income See 1099-MISC (page D-5);Insurance $ 550;Interest expense 7,000;Property taxes 1,000;Miscellaneous expenses 600;Depreciation (the house was acquired in 1990) 3,000;Required: Although Noah and Joan do not believe their tax return will be unduly;complicated, they do realize their limitations and come to you for assistance. You are;to prepare their federal income tax return in good form, signing the return as the;preparer. Do not complete a California state income tax return. Noah and Joan have;completed a tax organizer and have also given you several IRS forms (see pages D-4;and D-5) that they were not sure what to do with. Assume any other information;(addresses, etc.) that you may need. The following forms and schedules are required;Form 1040 Schedule E;Schedule A Schedule SE;Schedule B Form 2441;Schedule C Form 8949;Schedule D;Note: The forms included in Appendix D are provided for the student to work only;one of the two comprehensive problems. If desired, additional forms may be obtained;from the IRS Web site at www.irs.gov. use 2012 form.
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