COMPREHENSIVE PROBLEM -
Benjamin Warren and his wife Rachel will be filing a joint return this year. Personal information on the couple is as follows:
Benjamin-Age 36, social security number 010-40-0101
Rachel-Age 35, social security number 020-40-2020
Children-Three, ages 3-12. They claim them as dependents.
Benjamin is an attorney working for a large corporation and earns a salary of $75,000. Rachel is a dentist and earns $88,000 working for a dental corporation. Benjamin and Rachel also moonlight on the weekends and their records show the following:
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Gross billings
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$24,000
|
|
Expenses:
|
|
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Dues and publications
|
1,150
|
|
Rent expense
|
4,250
|
|
Bank charges
|
100
|
|
Copying charges
|
850
|
|
Printing charges
|
350
|
|
Computer expenses
|
1,550
|
|
Office expenses
|
500
|
|
Secretarial expenses
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3,000
|
|
Travel
|
285
|
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Telephone charges
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750
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Benjamin and Rachel each have an IRA and each contributes the maximum allowed per year. However, this year Benjamin mailed in his check for $2,000 on December 15 and it never arrived at the bank. He went to the bank on January 16, 2017, and made out a new check.
During the year, the Warrens received the following dividends and interest income:
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General Corporation
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$800
|
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Pure Dog Food, Inc.
|
650
|
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National City Bank (interest)
|
1,400
|
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State of New York Bonds (interest)
|
750
|
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Great Britain Motors (foreign corp.)
|
650
|
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Series EE Bond
|
125
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Rachel is a very big believer in owning real estate. She convinces Benjamin that they should invest in apartment buildings. During the year, the following transactions were recorded:
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Rental income
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$22,000
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|
Expenses:
|
|
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Depreciation expense
|
4,000
|
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Painting
|
2,000
|
|
Plumbing
|
1,000
|
|
Utilities
|
2,500
|
|
Mortgage interest on buildings
|
4,000
|
|
Property taxes
|
2,600
|
|
Cleaning and repairs
|
1,200
|
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Insurance
|
750
|
|
Management fees
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375
|
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Advertising vacant apartments
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175
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Benjamin requires all new tenants to make a security deposit when they move in. The deposit is credited towards their last month's rent. This year, they received $800 in security deposits.
During the year, Benjamin and Rachel made the following expenditures:
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Medical expenses
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$1,200
|
|
State and local income taxes
|
6,500
|
|
Real estate taxes
|
3,500
|
|
General sales taxes (actual)
|
2,250
|
|
Home equity loan
|
500
|
|
Home mortgage interest
|
11,000
|
|
Charge card interest
|
650
|
|
Cash contributions
|
3,300
|
|
Contribution of clothing to Goodwill
|
650
|
Also, Rachel took a continuing education course at the local university in order to renew her dental license. The tuition for the course was $275 and her books cost her $65tRachel's IRA is with a local stock brokerage firm and they charged her a $25 fee for administering her account.
On June 1 the Warrens sold Generous Trading Corp. stock for $4,600. They had purchased the stock on May 16, 1988, for $3,800. Also, they -sold Goodluck Goldmine's stock for $5,400 on December 1, 2017. They had purchased this stock on June 23, 1987, for $2,800. Benjamin and Rachel had purchased a summer home in the mountains on May 8, 1985, for $45,000 but they used it very little. They sold it on July 14 of this year for $65,000.
Prepare Benjamin and Rachel's tax return for 2017. On Fill in Form 1040 and Schedules A, C, D, E and SE.