Reference no: EM131251698

Individual Tax Project -

Instructions:

Complete the 2016 federal income tax return for Robert and Marie Brown.  Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040.  If required information is missing, use reasonable assumptions to fill in the gaps.  You may omit AMT considerations for the return.  You may work individually or in teams of two for this project.

Robert and Marie Brown live in Roswell, Georgia.  Robert is the Vice-President of Sales at a small start-up company.  Marie is a former advertising executive who currently consults with former clients. 

The Browns have three children Rebecca (age 18), Alan (age 15), and David (age 12).In January, Rebecca left home to attend a liberal arts college.  All three children qualify as Robert and Marie's federal income tax dependents. The Browns plan to file a joint tax return. The Browns provided the following information:

• Robert's social security number is 598-94-2583
• Marie's social security number is 301-52-2942
• Rebecca's social security number is 887-44-8710
• Alan's social security number is 810-42-9092
• David's social security number is 855-11-3021
• The Brown's mailing address is 85 North Maple Drive, Roswell, Georgia 08233

Robert Brown reported the following the following information relating to his employment during the year:

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Georgia Energy	$118,325	$29,230	$14,400

The above amounts do not reflect any income items described below. Robert's employer withheld all payroll taxes it was required to withhold. The entire Brown family was covered by minimum essential health insurance during each month in 2016.  The insurance was provided by Robert's employer, Georgia Energy.

Marie Brown received the following revenue during the year (she uses the cash method of accounting).

Consulting revenue reported to her on a Form 1099-MISC, Box 7

High-end Retail                                        $32,000

Jensen's Health Products                           $8,500

Strategic Solutions                                   $3,750

During the year, Marie paid the following business expenses:

Consultant-related:

Airfare                                                    $2,900

Hotel                                                       $1,450

Meals                                                       $390

Parking                                                    $320

Marie drove 2,900business miles for her consulting-related activities (she has documentation to verify)

None of Marie's business activities s required the filing of Form(s) 1099 to report payments she made during the tax year.  In addition, Ms. Brown drove a 2014 Lexus purchased on January 1, 2014 for all of her business mileage.  She drove the vehicle a total of 10,605 miles during the year for all purposes.  Marie has written documentation to support the mileage amounts.  She also has access to another vehicle for personal purposes.

The Browns also received the following interest and dividends during the year:

Interest income from First Bank of Georgia                              $320

Interest income from Patterson, Georgia School District            $200

Interest income from U.S. Treasury Bond                                $350

Interest income from General Mills corporate bond                   $400

Qualified dividend income from Rio Tinto                                 $1,500

Qualified dividend income from Microsoft                                 $750

Qualified dividend income from Cooper Tire                             $200

Qualified dividend income from Cardinal Health                        $425

Qualified dividend income from Union Pacific                            $140

Qualified dividend income from Procter & Gamble                     $190

Qualified dividend income from PepsiCo                                   $225

Qualified dividend income from Kellogg                                     $200

Qualified dividend income from Abbott Labs                               $275

Qualified dividend income from 3M                                            $350

Dividend income (not qualified) from China Fund                        $2,000

The Browns did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.

The Browns had the following activity in their brokerage account during the year(all transactions were reported on a Form 1099-B.  Basis information on each stock sale was reported to the IRS):

Sold 2,000 shares of Microsoft                           7/1/16                                   $22,500

Sold 75 shares of Apple, Inc.                             4/15/16                                $28,750

Sold 350 shares of Cooper Tire                          10/14/16                              $14,700

Sold 1,000 shares of Cardinal Health                  9/3/16                                   $35,000

Sold 50 shares of Union Pacific                           1/7/16                                   $2,750

Purchased 100 shares of Procter&Gamble            7/10/16                                $7,700

Purchased 350 shares of Cooper Tire                   11/1/16                                $14,000

Purchased 350 shares of PepsiCo                        5/14/16                                $32,000

Purchased 300 shares of Kellogg                         10/14/16                              $21,000

Relevant tax basis/holding period information related to sales of securities in the current year:

Purchased 2,000 shares of Microsoft on 5/1/16 for $21,000

Purchased 200 shares of Apple, Inc. on 3/8/2014 for $90,000

Purchased 300 shares of Cooper Tire on 1/12/2013 for $9,000

Purchased 50 shares of Cooper Tire on 6/28/16 for $2,000

Received 1,000 shares of Cardinal Health from Marie's father as a gift on 10/10/98. Her father's basis in the stock at the time of the gift was $7,000.  Fair market value of the stock at the date of the gift was $41,000

Purchased 100 shares of Union Pacific on 9/5/15 for $6,000

The Browns have a $43,000 long-term capital loss carryoverfrom their prior tax year.

The Browns received a Georgia state income tax refund of $400 in May of 2016.  The Browns received the refund because they had overpaid their Georgia state individual income tax in 2015.On their 2013 Federal income tax return, the Browns deducted and received tax benefit for allthestate tax income taxes they paid in 2015.

In May, Robert was injured in a home accident.  The injury prevented Robert from working for about a month.  During this time, Robert received $15,000 in disability payments attributable to a disability insurance policy.  The disability policy premiums were paid on Robert's behalf as a nontaxable fringe benefit.

The Browns paid the following expenses during the year:

Dentist (unreimbursed by insurance)                                                     $1,500

Doctors (unreimbursed by insurance)                                                    $2,425

Prescriptions (unreimbursed by insurance)                                             $675

Real property taxes on residence                                                          $7,525

Vehicle property tax based upon value                                                  $1,250

Mortgage interest on principal residence                                                $12,550

Margin interest paid to broker                                                               $600

Contribution to United Way                                                                   $2,000

Contribution to American Cancer Society                                               $5,000

Contribution to neighborhood drive to oppose development project          $500

Contribution to the Temple Mount Synagogue                                         $12,000

Fee paid to Mouser, Johnson, and Hintze CPAs for tax preparation            $450

The Browns also donated clothing, electronics, furniture and other household goods to the Salvation Army of Roswell, Georgia on April 15, 2016. Estimated thrift value of the goods donated was $275.

Miscellaneous Information

Marie received the following payments as a result of a lawsuit she filed for damages sustained in a car accident:

Medical Expenses for physical injuries                                          $2,500

Emotional Distress (from having been physically injured)               $12,000

Punitive Damages                                                                       $10,000

                Total                                                                          $24,500

Eight years ago, Marie purchased an annuity contract for $88,000.  She received her first annuity payment on January 1, 2016.  The annuity will pay Melissa $15,000 per year for ten years (beginning with this year).  The $15,000 payment was reported to Melissa on Form 1099-R for the current year (box 7 contained an entry of "7" on the form).

On September 1, the Browns paid $200 in foreign taxes attributable to the dividend received from the China Fund.

During the year, the Browns paid a portion of Rebecca's tuition to attend The College of Liberal Arts of Georgia (CLA).  They also purchased Rebecca's school books.  Rebecca attended the spring/summer and the fall semesters as a full-time student.  In total, the Browns paid $9,000for tuition and $2,000 for books.  Rebecca used $6,000 from a scholarship she received from CLA to pay the remaining $6,000 of tuition for the year.  Rebecca was not required to perform any services as a condition of accepting the scholarship.  Rebecca was not employed during the year. CLA's address and employer identification number (EIN) is as follows:

The College of Liberal Arts of Georgia

65 Ivory Tower

Pine Grove, GA 08069

EIN- 22-5698324

The Browns would like to contribute to the Presidential Election Campaign.  The Browns would also like to receive a refund (if any) of tax they may have overpaid for the year.  Their preferred method of receiving the refund is by check.