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INSTRUCTIONS:

Please show all work. Every item on the assignment must have an explanation how the amount is computed on the tax return and a reference to IRS publication. Use only 2011 federal income tax forms.

1) Dennis, SSN 987-12-1234 and Carrie, SSN 789-21-4321 are married and have two children, John and Janet. Dennis works as a sales manager for a national pharmaceutical company and Carrie is a nurse. They live at 123 College Avenue, Rivercity, CA. 92506. During the year they receive $1,700 in dividends from their investment in Rivercity bonds and $2,100 of interest income from Riverside Bank.  They each wish to contribute to the Presidential Election Fund. The Carrie’s gambling winnings for the year were $1,900.

                                        Dennis       Carrie
Salary                                $75,000     $78,450
Federal tax withheld              15,500      12,910
State income tax withheld      5,250        4,960
FICA withheld                       5,738        6,001

2) During the year, Dennis paid his ex-wife, Karla, SSN 554-11-1234, $2,000 alimony per month for the entire year. 

3) Carrie’s Uncle Sam gave her a birthday gift of $5,000 Cash during the year.

4) During the year, they incurred and paid the following amounts for medical expenses:

Country club dues                             $ 2,100Personal use
Health club dues                               1,400no prescribe by the doctor
Hospital bills (after reimbursement)       3,500
Doctors                                           875
Chiropractors                                    650
Dentists                                          1,750
Prescription drugs                             475
Over-the-counter drugs                     600
Cost of diet foods                             900publication 17
Medical Insurance                             2,400
   
5) During the year, they incurred and paid the following taxes and other amounts for the year: Personal use

Home Mortgage interest                         $ 8,100
Credit card interest                               1,400personal
Real estate taxes- residence                   4,500
Sales taxes paid for year                        975
Medical insurance                                  950
Auto Insurance                                     2,350personal
Homeowners insurance                           900
Other medical expenses- Pre. Drugs          950deductible
Auto license (net)registration                  550
Boy Scouts                                          800
St. Mary’s Church                                 600
Republican Party                                   250
Auto loan interest                                 450personal

6) Dennis owns and operates a health club called “Mervyn’s.” Dennis has three employees whose compensation consists of a weekly salary and a 40% commission on the services they provide to the customer.  Dennis uses the cash method of accounting. For the current year, he has the following revenue and expenses: Schedule C, sc, and 4562 business related

Gross Receipts                $198,100
Business Insurance          2,400
Office Supplies                3,500
Gross Salaries                 19,975
Payroll Taxes                  2,950
Maintenance                   2,750
Cleaning Service              1,800
Depreciation                   ??
Phone                           2,450
Utilities                         12,150
Equipment Rent              1,600
Advertising                    1, 900
Auto loan interest           350
Parking tickets                500

7) Dennis and Carrie also paid the following items:

Investment advice                            $ 2,100
Subscriptions to investment journals    1,400
Dues to professional organizations       3,500
Parking at work                                250Personal
Safe-deposit box                              650
Driving citations                               1,750
Gambling losses                                800
Loan to a friend                               600
Nurses uniforms                               325

8) Dennis and Carrie also paid the following items for their rental unit located at 1775 First Street, Rivercity: we are using 2011 forms

Rental Income                             $ 12,100
Repairs to the rental unit              1,400
Mortgage interest for the rental     3,500
Property taxes                            850
Cleaning expense                         650
Insurance                                   1,950

Other information for the Rental:

Asset: Building/Land
Date Acquired: Sept 15,2007
And also put in service     
Initial Basis: Land = $50,000;     
Building= $100,000
Life of Asset: 

9) Dennis purchased the following assets for his business:

Asset: Building/Land
Date Acquired: March 15, 2010
Initial Basis: Land = $30,000; Building = $93,000
Life of Asset: 

Asset: Computer Equipment
Date Acquired: April 3, 2010
Initial Basis: $2,000
Life of Asset: 

Asset: Office Furniture
Date Acquired: June 30, 2009
Initial Basis: $15,000
Life of Asset: 7 year

10) Dennis and Carrie have a 4-year-old daughter, Jessica. They paid $2,100 in qualified child-care expenses during the year.

11) In addition, Dennis and Carrie support their son, Corey, who is 19 and is a full-time college student. Corey earns $8,000 at a part time job. His tuition, books, and fees total $15,000.  His father gives him an additional $6,000 to pay for room and board and other living expenses.

12) Dennis pays $7,800 of his mother Ruanda 75yrs old living expenses. His mother receives $3,500 in Social Security benefits and $4,100 from a qualified Retirement plan. She deposits her income in her savings account.

13) Carrie’s father Al 76yrs old has no sources of income. During the year, Mary pays all of her father's support. He is a citizen and resident of New Zealand.

14) Dennis and Carrie paid $8,000 in federal estimated tax payments and $2,500 In state Income tax for the year.  

15) Dennis and Carrie’sTroy’s 2008 tax return is audited. The auditor determines that Dennis inadvertently understated his ending inventory in calculating his business income. The error created an additional tax liability of $5,000 andan interest charge of $600 on the additional tax liability.

They paid the liabilities in and interest on 2011.

16) Instructions: Please compute Dennis and Carrie’s Mary’s Federal Income tax liability for 2011. Use the 2011 Federal income tax forms.

Prepare State of California State Income tax return – Form 540 And Schedules

Taxation, Accounting

  • Category:- Taxation
  • Reference No.:- M9408

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