tax return problem 4

mcgraw-hill taxation of individual

 

appendix c      c-5

  

Tax Return Problem 4 Appendix C C-5

Required:

1. Use the following information to complete Phillip and Claire Dunphy’s 2012 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps. Ignore the alternative minimum tax for this problem.

1. Any required forms, schedules, and instructions can be found at the IRS Web site (

www.irs.gov

). The instructions can be helpful in completing the forms. The following forms are required:

1. 1040

1. Schedule C

1. Schedule D

1. Form 4562

1. Form 4797

1. Form 8949

1. Schedule SE

Phillip and Claire are married and file a joint return. Phillip is self-employed as a real estate agent, and Claire is a flight attendant. Phillip and Claire have three dependent children. All three children live at home with Phillip and Claire for the entire year.

The Dunphys provide you with the following additional information:

0. The Dunphys do not want to contribute to the presidential election campaign.

0. The Dunphys live at 3701 Brighton Avenue, Los Angeles, CA 90018.

0. Phillip’s birthday is 11/5/1965 and his Social Security number is 321-44-5766.

0. Claire’s birthday is 5/12/1968 and her Social Security number is 567-77-1258.

0. Haley’s birthday is 11/6/1999 and his Social Security number is 621-18-7592.

0. Alex’s birthday is 2/1/2001 and her Social Security number is 621-92-8751.

0. Luke’s birthday is 12/12/2005 and his Social Security number is 621-99-9926.

0. The Dunphys do not have any foreign bank accounts or trusts.

1. Claire is a flight attendant for Western American Airlines (WAA), where she earned $57,000 in salary. WAA withheld federal income tax of $6,375, state income tax of $1,800, Los Angeles city income tax of $675, Social Security tax of $3,600, and Medicare tax of $825.

1. Phillip and Claire received $300 of interest from State Savings Bank on a joint account. They also received a qualified dividend of $395 on jointly owned stock in Xila Corporation.

1. Phillip’s real estate business is named “Phillip Dunphy Realty.” His business is located at 645 Grove Street, Los Angeles, CA 90018, and his employer identification number is 93-3488888. Phillip’s gross receipts during the year were $730,000. Phillip uses the cash method of accounting for his business. Phillip’s business expenses are as follows:

Advertising

$ 5,000

Professional dues

800

Professional journals

200

Employee wages

48,000

Insurance on office contents

1,120

Accounting services

2,100

Miscellaneous office expense

500

Utilities and telephone

3,360

Payroll taxes

3,600

Depreciation

To be calculated

On March 20, Phillip moved his business out of the old offices at 1103 Allium Lane into a newly constructed and equipped office on Grove Street. Phillip sold the old office building and all its furnishings. Phillip’s expenditures for the new office building are as follows:

Date Acquired

Asset

Cost

 3/20

Land

$300,000

 3/20

Office building

2,500,000

 3/20

Furniture

200,000

4/1

Computer system

350,000

6/1

Artwork

150,000

Phillip computes his cost recovery allowance using MACRS. He would like to use the §179 immediate expensing, but he has elected to not claim any bonus depreciation. Phillip has never claimed §179 or bonus depreciation before. The assets Phillip sold on March 20 are as follows:

Date Acquired

Asset

Sales Price

Original Cost

Accumulated Depreciation as of Beginning of the Year

5/1/05

Office building

$940,000

$900,000

$129,825

5/1/05

Land

200,000

100,000

0

7/1/05

Furniture

50,000

239,000

206,998

8/13/07

Furniture

10,000

324,000

222,782

4/12/08

Office equipment

100,000

120,000

67,524

5/13/10

Computers

$ 30,000

50,000

10,000

Phillip has never sold any assets relating to his business before this transaction.

1. The Dunphys sold 60 shares of Fizbo Corporation common stock on September 3, for $65 a share (minus a $50 total commission). The Dunphys purchased the stock on November 8, 2010, for $90 a share. They also sold a painting for $13,000 on March 1. Claire purchased the painting for $20,050 on September 1, 2004, as an investment.

1. The Dunphys filed their 2011 federal, state, and local returns on April 14, 2012. They paid the following additional 2011 taxes with their returns: federal income taxes of $630, state income taxes of $250, and city income taxes of $75.

1. The Dunphys made timely estimated federal income tax payments of $16,000 each quarter during 2012. They also made estimated state income tax payments of $1,000 each quarter and estimated city income tax payments of $300 each quarter. The Dunphys made all fourth-quarter payments on December 31, 2012. They would like to receive a refund for any overpayments.