George Large (SSN 000-11-1111) and his wife Marge (SSN 000-22-2222) live at 2000
ID: 2718949 • Letter: G
Question
George Large (SSN 000-11-1111) and his wife Marge (SSN 000-22-2222) live at 2000 Lakeview Drive, Cleveland, OG 49001 and want you to prepare their 2012 income tax return based on the following information below:
George Large worked as a salesman for Toyboat, Inc. He received a salary of $80,000 ($8,500 of federal income taxes withheld and $1,800 of state income taxes withheld) plus an expense reimbursement from Toyboat of $5,000 to cover his business expenses. George must make an adequate accounting to his employer and return any excess reimbursement, non of the reimbursement was related to the meals and entertainment. Additionally, Toyboat provides George with medical insurance of $7,200 per year, George drive his car a total of 24,000 miles during the year, and he placed the car in service on June 1, 2010. His log indicates that 18,000 miles were for sales calls to customers at the customers' offices and the remainder was personal mileage. George uses the standard mileage reimbursement rate method. Assume his business miles were driven evenly during the year. George is a college basketball fan. He purchased two season tickets for a total of $4,000. He takes a customer to every game, and they discuss some business before, during, and after the games. George also takes his clients to business lunches. His log indicates that he spent $1,500 on these business meals. George also took a five day business trip to the Toyboat headquarters in Musty, Ohio. He was so well prepared that he finished his business in three days, so he spent the other two days sightseeing. He had the following expenses during each of the five days of his trip:
Airfare: $200
Lodging: $85/day
Meals: $50/day
Taxicabs: $20/day
Marge Large is self-employed. She repairs rubber toy boats in the basement of their home, which is 25% of the house's square footage. The business code is 811490. She had the following income and expenses:
Income from rubber toy boat repairs: $15,000
Cost of Supplies: 5,000
Contract Labor: 3,500
Long-distance phone calls (business) 500
The Large's home cost a total of $150,000, of which the cost of the land was $20,000. The FMV of the house is $225,000. The house is depreciable over a 39-year recovery period. The Larges incurred the following total other expenses:
Utility bills for the house: $2,000
Real estate taxes 2,500
Mortgage interest 4,500
Cash charitable contributions 3,500
Prepare Form 1040, Schedules A, C, and SE for Form 1040, and Forms 2106 and 8829 for the 2012 year. (Assume no depreciation for this problem and that no estimated taxes were paid by the Larges).
Explanation / Answer
Form 1040 Salary Received 80000 Business Income 2789 Total Income 82789 Less:Schedule A -21405 Total 61384 3800*2 7600 Taxable Income 53784 0-8500 10% 850 8500-34500 15% 3900 34500-61384 25% 6721 Total Tax 11471 Less Taxes Witheld 10300 Total Tax Payable 1171 Schedule A Medical and Dental Expenses 0 Taxes Paid Real Estate Taxes 2500 Interest Paid Mortgage Interest 4500 Gifts to Charity 3500 Unreimbursed Job Expenses 10905 Total Itemised Deductions 21405 Schedule C Income from Rubber Toy Boat Repair 15000 Less:Cost of Supplies -5000 Less:Contract Labour -3500 Less:Business Phone Calls -500 Total Business Income 6000 Less: Form 8829 Expenses -3211 Total Business Income 2789 Form 2106 Car Expense 9990 Travelling Expense 665 Meals and Expenses 5500 Total 10655 5500 Less Reinbursements 5000 Total 10655 500 Exp Allowed 10655 250 Total 10905 Form 8829 25% Used for Business Income from Business 6000 Mortgage Interest -1125 Real Estate Taxes -625 Utility Bills -500 Dereciation -961 Total 2789 Depreciation Calculation Less of FMV or Adjusted Cost 170000 Less:Value of Land -20000 Total 150000 Basis of Building 37500 Depreciation % 2.564 961.5
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