Jane Smith, age 40, is single and has no dependents. She is employed as a legal

Question

Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Jane's Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential Election Campaign Fund. Jane had health insurance all months of 2014. During 2014, Jane had the following income and expense items.

a. $100,000 salary from Legal Services, Inc.

b. $20,000 gross receipts from her typing services business

c. $700 interest income from Acme National Bank

d. $1,000 Christmas bonus from Legal Services, Inc.

e. $60,000 life insurance proceeds on the death of her sister

f. $5,000 check given to her by her wealthy aunt

g. $100 won in a bingo game

h. Expenses connected with the typing service:

Office rent $7000

Supplies $4,400

Utilities and telephone $4,680

Wages to part-time typists $5,000

Payroll Taxes $500

Equipment rentals $3,000

i. $9,00 interest expense on a home mortgage (paid to San Jose Savings and Loan).

j. $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2014. Jane had paid $14,000 for the silverware on July 1, 2005. She was reimbursed $1,500 by her insurance company.

k. Jane had loaned $2,100 to a friend, Joan Jensen, on June 3, 2011. Joan declared bankruptcy on August 14, 2014, and was unable to repay the loan. Assume the loan is a bona fide debt.

l. Legal Services, Inc. withheld Federal income tax of $16,000 and the appropriate amount of FICA tax from her wages.

m. Alimony of $10,000 received from her former husband, Ted Smith.

n. Interest income of $800 on City of Boca Raton Bonds

o. Jane made estimated Federal tax payments of $1,000

p. Sales taxes from the sales tax table of $946

q. Property taxes on her residence of $1,100

r. Charitable contributions of $2,500

s. In November 2014, Jane was involved in an automobile accident. At the time of the accident, Jane's automobile had an FMV of $45,000. After the accident, the automobile's FMV was $38,000. Jane's basis in the car was $52,000. Jane's car was covered by insurance, but because the policy had a $5,000 deduction clause, Jane decided not to file a claim for the damage.

Compute Jane Smith's 2014 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4684 and Schedules A, C, and D. Suggested software: H&R BLOCK Tax Software.

Explanation / Answer

Form1040

First Name : Jane Last Nme = Smith SSN= 123-45-6789

Home Address: 2020 Oakcrest Road,

City= Boca Raton, FL 33431.

Filing status = Single

Exemptions:

6a) Yourself:Jane Smith

Income

7) Salaries   = $100,000

8a)Taxable interest = $700

b) Tax-exempt= $800

11) Alimony received = $10,000

12)Business loss =($4,580) (SCHEDULE C)

17) Rental real estate, royalties = $60,000

21)   Other income =$6,100

a)Christmas bonus from Legal Services= $1,000

b)Gift received =$5,000 check

c)Game won = $100

22)Add lines 7 through 21.=$173,020

Adjusted Gross income

NIl

37) Adjusted Gross income = $173,020

38)Adjusted Gross income = $173,020

40)Itemized deductions=$6,200

41) Subtract line 40 from line 38 = $166,820

43) Taxable income =$166,820

Payments
64 )Federal income tax withheld =$16,000

65) 2014 estimated tax payments=$1,000

74) Total payments = Add lines 64, 65, = $17,000

__________________________________________________________________________

Schedule A

Taxes paid

5) State and local tax

b) Sales taxes f=$946

6) Personal property taxes = $1,100

9) Add all above=$2,046

Interest Paid

10) Home mortgage =$900

15) Add Above = $900

Gifts to Charity

16) Gifts by cash or check=$2,500

19) Add above $2,500

Casualty or theft loss(es).

20
Casualty or theft loss(es). Attach Form 4684 = $52,000

_____________________________________________________________________________

Form 4684

SECTION A—Personal Use Property

1
Description of properties

Property A : Automobile

Property B =silverware,July 1, 2005.

Property C =Loan to Joan Jensen, June 3, 2011.

ane had loaned $2,100 to a friend, Joan Jensen, on Joan declared bankruptcy on August 14, 2014, and was unable to repay the loan.

2
Cost or other basis of each property

Automobile=$52,000

Silverware = $14,000

Loan to Joan Jensen, = $2,100

3)Insurance or other reimbursement

Automobile= $52,000

Silverware =$1,500.

4) Gain from Casulty

Automobile = $52,000 - $52,000 = 0

Silverware = $14,000 -$1,500. = $12,500

5
Fair market value before casualty or theft

Automobile=$45,000.

silverware = $15,000

6)Fair market value after casualty or theft

Automobile=$38,000.

7) Subtract line 6 from line 5 =$38,000. - $45,000

8) Enter the smaller of line 2 or line 7=$2,100

9)Enter the Subtract line 3 from line 8=$1,500

10) Casualty or theft loss = $52,000 + $2,100+ $12,500=$66,600

11) Enter the smaller of line 10=$2,100

12)Subtract line 11 from line 10=$2,100 - $66,600=$64,500

13)Add the amounts on line 12 of all Forms =$64,500

14)Add the amounts on line 4= $12,500

15)If line 14 is more than line 13=Nil

16)If line 14 is less than line 13, enter the difference =$52,000($64,500 - $12,500)

____________________________________________________________________

Profit or Loss From Business SCHEDULE C

Name of proprietor   Jane Smith SSN= 123-45-6789

A)Principal business or profession:Legal secretary services

C)Business name = Legal Services, Inc.

E)Business address = 1986, campus of Florida Atlantic University

F) Accounting method =CAsh

G) Did you “materially participate participate” in the operation of this business during 2014=Yes

Part I

Income

Gross receipts or sales = $20,000 gross receipts

7) Gross income = $20,000

Part II) Expenses

Office expense =

20)

a)Equipment rentals $3,000

b)Office rent =$7000

22)Supplies= $4,400

23) Taxes = $500

25)Utilities and telephone = $4,680

26) Wages=$5,000

28)Total expenses= $24,580

29)Tentative profit or (loss). Subtract line 28 from line 7.= $24,580 - $20,000=$4,580

32) Loss =$4,580

_________________________________________________________________________

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