Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron

_james__jeana_jones_tax_2011

Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint

tax return in the current year. They are both employed. Lyle and Kaye, ages 38 and 37, respectively, have

combined salaries of $240,000, from which $42,000 of federal income tax and $10,000 of state income tax are

withheld. Lyle and Kaye own two homes. Their primary residence is located at 11620 N. Mount Ave., New Haven,

Connecticut 22222, and their vacation home is on the beach in Fort Lauderdale, Florida. They often rent their

vacation home to supplement their income. The following items are related to the James’ ownership of the two

homes:

Item New Haven Fort Lauderdale

Rental income $— $15,000

Qualified residence interest 7,200 5,000

Property taxes 1,400 1,000

Utilities 1,000 1,300

Repairs 200 300

Depreciation 0 3,500

Advertising 0 200

Insurance 1,500 1,500

The James family used their Fort Lauderdale home 20 days during the year. They rented the vacation home

60 days during the year. Lyle and Kaye jointly purchase stock in various corporations and make the following

transactions in the current year. (None of the stock qualifies as small business stock.)

Price

Date Transaction Paid/Sold

2/15 Bought 50 shares of Lake common stock (they own no other Lake $1,000

stock)

5/14 Bought 100 shares of Bass common stock (they own no other Bass 3,000

stock)

5/24 Sold 25 shares of Lake common stock 250

5/27 Bought 50 shares of Lake common stock 900

Sold 50 shares of Bass common stock 1,750

7/12 Bought 100 shares of Bass common stock 2,800

The James’ have no other income or expense items. Lyle and Kaye’s Social Security numbers are 111-22-

3333 and 444-55-6666, respectively. Jessica and Jerron’s Social Security numbers are 123-45-6789 and 888-99-

1010. The James’ use the IRS method of allocating all expenses between personal and rental use.

File the James’ income tax return Form 1040, Schedules A, D, and E using the

currently available forms and rates. Disregard any tax credits for which they may be

eligible.

Accounting 3333

Comprehensive Final Tax Return

Fall 2013

100 Points

Due Date: TUESDAY December 3, 2013 by NOON in Thatcher Hall 152. NO LATE work will be accepted – plan for traffic, accidents, illness, etc. You may fax the return before the time due to 405-974-3853 or you may turn it in early. It will NOT be accepted by email or into the drop box.

James

A. Jones and his wife,

Jean

B. are Oklahoma residents for the 2012 tax year. Jean, who was legally blind, passed away on June 5, 2012. Prepare a 2012 Individual Income Tax Return for the taxpayers. Be sure that you use the proper forms for the date of the return.

Selected personal information:

No

James	Jean
Date of Birth	January 31, 1945	July 4, 1961
Social Security Number	448-55-9998	448-55-9999
Presidential Election Campaign		No

Jean worked as a phone sales representative, and James lists his occupation “retired”.

James and Jean have a son Adam, 6/1/99, SS# 448-55-1122. Adam lived with them all year and attended school. He has no income to report.

Income and expenses as presented by James:

1)
On August 15, 2012, James moved across the state of Oklahoma from Idabel, and meets
both the distance and time tests requirements for deducting moving expenses. He drove his
personal automobile 174 miles one way for the move and paid $12 in tolls while en route.
He paid a moving company $1,490 to move his household goods from his old residence to
the new residence.

2)
James lists his current address as 200 N. University Dr., box 101, Edmond, OK 73034. His
phone number is 405-974-2000.

3)
James worked for Atlantic Coast Dining, Inc. in the dish room in Idabel, as a means of
keeping busy until he decided to relocate for better employment opportunities for himself,
and better education opportunities for Adam.

4)
James’ W-2 (from Atlantic Coast) contained the following information: box 1 (wages)
$15,234, box 2 (federal income tax withheld) $1,621, box 3 $15,234, box 4 $644, box 5
$15,234, box 6 $221, and box 17 (state income tax withheld) $610.

5)
Jean worked for Institutional Operation Co. until she passed away. Her W-2 contained the

following information: boxes 1, 3 & 5 $7,324, box 2 $308, box 4 $454, box 6 $106 & box 17 $125.

6.
James received a 1099-INT reporting $14,000 in interest income from the Bank of America, NA. Jean cashed a jointly owned US EE Savings Bond at the Bank of America on May 2nd. She had a basis of $50 in the bond and received a total of $105 in the transaction. James owned several municipal bonds issued by the City of Dallas. He received a 1099-INT reporting a total of $572 in interest income.

7.
James received a 1099-DIV reporting $7,685 in qualified dividends from AT&T stock that
he has owned for more than 20 years.

8.
James cashed in on retirement savings as follows:

· Income from the Teachers’ Retirement System. His 1099-R reports a gross distribution of $12,567, with a taxable amount of $12,450. He had federal income tax withheld $750 and state income tax withhold of $561.

· He also received a 1099-R for a traditional IRA normal distribution showing a gross distribution of $8,275. He had federal income tax withheld of $428 and state income tax withheld of $49. The distribution code was 7.

· For distributions from his ROTH IRA, he received a 1099-R for a qualified distribution with gross proceeds of $3,472. He had nothing withheld for state or federal income taxes on this transaction. He started this ROTH in 2001.

9.
Shortly after Jean’s death, James found himself at the Shawnee Casino. After several free drinks, he hit it big and received a Form W-2G reporting winnings of $2,105 and federal and state income tax withholdings of $610 and $202 respectively. He was saddened to admit that he ended up losing $10,543.22 before the evening’s alcohol had worn off. He doesn’t understand why he’d get a W-2G when he feels he should be issuing a 1099-MISC to the casino instead for his evening of stupidity.

10.
James also received a SSA-1099. Box 5 reported $15,751 in total benefits with Medicare premiums of $1,062 and $170 withheld for federal income tax purposes. James also served as a juror for one day but was dismissed by the judge when word arrived at the courthouse that Jean had passed away. He received $75 for one day’s jury duty pay and had $5 withheld for federal income taxes and $5 for state income taxes.

11.
The state sent James a 1099-G reporting a state income tax refund of $576 for 2012. James and Jean did itemize on their 2011 tax returns and deducted state income taxes paid. Their itemized deductions in 2012 totaled $18,900, including $2,020 for state income taxes.

12.
James sold the family home in Idabel (1021 S. Main, Idabel, OK 73046), before he moved for $575,000. James and Jean had paid $220,000 for the home in 1998 when they purchased it. They had made no capital improvements to the home, James then purchased a new home in Edmond for $275,000, closing on October 16, 2012. James and Adam rented the home prior to closing on it. They made rental payments for 2 months totaling $2,400.

13.
After moving to his current residence, James established a neighborhood watch business for his neighborhood. His neighborhood association gave him a 1099-MISC reporting nonemployee compensation of $5,756 for “watch” services provided during 2012. He incurred the following expenses for his business endeavor: $672 in printing fees, $1,078 in supplies used, and $584 in telephone expenses. He also drove 1100 miles to carry out this activity patrol.

14.
Ever the gambler, James tried his hand at investing in the stock market during 2012 as follows. The following was reported by the broker to the IRS with purchase fees added to basis and sales fees deducted from proceeds. James wonders if he can be classified as a professional gambler since he both gambles in the stock market and at the casino? Report to him your findings on this issue and how it may/may not impact his taxes.

· 1,500 shares of SYBR common stock on March 27, 2012 for $1,830 plus $23 in broker fees. He sold this stock on December 1, 2012 for $1,215 and paid another $23 in broker fees.

·
1,000 shares of SNG common stock on January 28, 2007 for $1,500 plus $23 in broker fees. He sold those shares on December 20, 2012 for $1,420 and paid another $23 in broker fees.

· 500 shares of SONC common stock on May 3, 2012 for $10,920 plus $23 in broker fees and sold them on November 30, 2012 for $8,975 and paid another $23 in broker fees.

This sale below was reported to IRS only with proceeds price, no basis was determined by the broker.

· On May 1, 2012, Jean and James sold 25,600 shares of WMT common stock for $1,177,600. This was to help them pay some of the overwhelming medical bills. They paid a total of $246 in broker fees in the disposition of the stock. Jean originally purchased the stock on March 20, 1980. She bought 100 shares of WMT’s common stock for $3,175. Stock splits have been very profitable.

15.
James and Jean inherited some farmland in Nowheresville, Texas. They received rental
income during 2012 of $6,900. Because they did not live near the property, they hired a
REALTOR to manage the rental of the property. They paid the REALTOR $1,500 and paid
$575 in property taxes. The REALTOR decides on the lease and does all rent collections for him. James isn’t sure whether or not this is passive income for him – determine if it is or not and why.

16.
In trying to find a cure for Jean’s illness, the Jones’ undertook several experimental treatments. Unfortunately, many of them were not covered by insurance. After insurance paid its portion of their medical expenses, they still paid $15,752 for prescription medications, $175,682 in doctor’s bills, $575,001 for hospital bills, and $1,724 for health insurance premiums on Jean. They traveled 2,175 miles for medical purposed during 2012, of which 1,998 was prior to July. 1.

17.
They paid $798 in property taxes on their joint Idabel primary residence, and then James incurred and paid $444 on his new Edmond residence after the move, made a cash contribution to their church of $125,282 (including $4,000 directly from his IRA – proper paperwork exists for this) and another cash contribution of $1,500 to the Indonesian Disaster Relief Fund in Nepal. They paid $430 during 2012 for the preparation of their 2011 income tax returns and $125 to rent a safety deposit box at a local bank for important papers including tax returns. Proper documentation exists for all of the above. James incurred investment advice expenses of $1,500.

18.
James spent $5,126 for eleven energy saving windows and $750 for three energy saving doors. He paid another $7,500 for the new windows and doors to be installed. Likewise, the central heat & air system went out at his new residence, so he spent another $7,000 on a new geothermal heat pump system and paid an additional $800 for it to be installed. He has the proper documentation for the items that qualify. He had never taken any past credits for energy related items.

19.
During the time that Jean lived in 2012, they hired a housekeeper to help maintain the housework while Jean was hospitalized so that James could spend more time with her. Their employer identification number is 73-2164586. They paid 3,800 in wages to the housekeeper and withheld $437 from her paycheck for federal income taxes. The housekeeper’s services were terminated on June 15, 2012. They paid unemployment taxes of $285 to the state of Oklahoma. All wages that were taxable under FUTA were also taxable for state unemployment purposes.

20.
To try and meet new people in Edmond, James attended an art class at the local university spending $772 for tuition and related qualifying materials during the fall semester of 2012. He spent another $200 for books and supplies.

21.
James and Jean made quarterly payments during 2012 that totaled $54,000 for federal and $18,500 for state taxes.

Other:

Assume that the tax return was prepared and filed on April 15, 2013.

Your assignment is to prepare the federal income tax return for the taxpayers as if you were their paid preparer. The only form which you may deem necessary you do not need to complete is 2210. I do not need W-2’s, 1099’s etc. You cannot utilize any software to aid in the preparation of the tax return. You may download and utilize any forms and worksheets available on the IRS’ website (www.irs.gov). You may utilize any publicly available resource for research on this assignment. Do not discuss your return with anyone else until after you have turned the assignment in to your instructor.