Reference no: EM131298456
Tax Return Project
You should use 2015 rates if you are preparing the return by hand. The forms can be obtained from the IRS website at www.irs.gov. The forms must be neatly and legibly filled out with black ink. If you are using 2015 tax preparation software, use the rates from that software. Do not calculate depreciation for alternative minimum tax. As a hint, at a minimum, you should have at least the following forms and schedules: 1040, A, B, C, D, long form SE, 4562, 4684, 6251, 8283, and 8949. Please turn in all forms and schedules required to be sent to the IRS. Your project should be stapled together with your name on the first page.
You have been asked to prepare a 2015 tax return for the Baker family. Josh C. Baker (your 7 digit UNO # add 00, born 12/26/1972) and his wife, Linda T. Baker (234-11-5678, born 10/31/1973) have three children; Rose, age 7 (224-33-4455), Sally, age 10 (244-44-5566) and Roger, age 18 (243-88-7788). They live at 1205 Broadway Street, New Orleans, LA 70118.
Josh Baker is a psychiatrist with his own practice, New Orleans Therapy ("NO Therapy"), which is located nearby at 1705 Magazine Street, New Orleans, LA 70115. NO Therapy uses the cash basis of accounting.
1. NO Therapy had the following transactions during 2015:
Service Revenue $ 650,000
Salaries 178,000
Advertising 6,000
Office Rent 30,000
Insurance 50,000
Utilities 18,000
Meals & Entertainment 6,000
Taxes & Licenses 19,000
Dues & Subscriptions 4,000
Travel Expenses 5,000
Legal & Professional Fees 11,500
Cell Phone (100% business) 2,400
Supplies 8,000
Office expense 5,000
2. NO Therapy purchased $110,000 of office furniture for business use on April 3, 2015. An election to expense the acquisition cost under Code Section 179 is made. The assets have a 7-year life and Josh wants to maximize the current year deduction.
3. The following property was acquired and placed in service in prior years:
Property Placed in service Property Class Cost Method
Computers March 2014 5 year $30,000 MACRS
Printers May 2014 5 year $8,000 MACRS
Equipment April 2014 7 year $49,000 MACRS
Code Section 179 or Bonus depreciation was not elected for any of the property above.
4. Linda is a nurse at Children's Hospital. Her 2015 W-2 reported the following information:
Wages $55,000
Federal income tax withheld $11,000
State income tax withheld $2,000
Linda's job provided health insurance for the family.
5. Josh paid estimated federal income taxes of $36,000 ($9,000 for 4 quarters) and estimated state income taxes of $6,000 ($2,000 for the first 3 quarters).
6. Josh and Linda received a Form1098-T from UNO showing they paid $5,000 in eligible education expenses for Roger who is a full-time student in his first year at UNO.
7. Josh is still paying off his loans from medical school. He received Form 1098-E showing that he paid $7,000 in student loan interest.
8. The Baker's donated 300 shares of ABC company stock to St. Jude's Children's Hospital on July 1, 2015. The stock which had a basis of $10 per share and a FMV of $20 per share was purchased in 2008. ABC is publicly traded.
9. Josh and Linda had the following personal expenses for the year:
Home mortgage interest $20,000
Real property taxes 9,000
Cash donations:
First Methodist Church 5,200
LASPCA 100
UNO Athletic Foundation 200
UNO Dept. of Accounting 2,000
American Cancer Society 500
Medical Expenses:
Prescription medications unreimbursed 2,400
Doctor's bills unreimbursed 12,500
Insurance premiums for Linda's mother 5,100
Wheelchair ramp for Linda's mother 9,000
(added value to home: $3,000)
10. Josh and Linda provide 100% of the support for Linda's mother, Sarah Bates (222-44-6666). She lives in a nursing home. She spends every other weekend with them.
11. Josh and Linda have the following investment income for 2015:
Whitney Bank (1099-INT) $1,200 interest
Ameritrade (1099-DIV) $9,000 dividends (qualified)
New Orleans municipal bonds $4,000 interest
12. Josh and Linda had the following stock transactions during 2015. They received Form 1099-B detailing the sales proceeds.
Date Shares Selling Price Basis .
1/14 Sold 500 shares ISC $35/share Paid $28/share for 400 shares on 2/10/2012.
There was a 2 for 1 stock split on 10/6/2014.
6/30 Sold 300 shares LOW $40/share Paid $45/share for 400 shares on 4/8/2012.
9/25 Sold 100 shares RKL $32/share Paid $22/share for 100 shares on 3/20/2015.
100 shares of General Motors stock purchased in 2008 for $2,500 became worthless in 2015.
13. Josh received $250,000 of life insurance proceeds when his father passed away during the year.
14. The Baker's home was damaged during a tornado on August 12, 2015. The adjusted basis of the home before the tornado was $625,000. The FMV before the tornado was $700,000 and the FMV after the tornado was $565,000. The insurance company reimbursement was $100,000.