Reference no: EM13915795

Noah and Joan Arc live with their family at 4342 Josie Jo, Santee, CA 92071.
Noah's SSN is Joan's is 45687542
Both are in their mid-30s and enjoy good health and eyesight.
Noah owns and operates a pet store and Joan is a fire-firefighter for the city.

1. The Arcs have 2 children, a son named Billie Bob (SSN 598-01-245), who is 7 years old. A daughter name Mary Sue (SSN, who is 4 years old.

The Arcs paid $2,800 to the roundup Day Care Center to take care of Mary Sue while they worked. Because Joan is a firefighter, she was home in the afternoon to care for Billie Bob after school.

2. For the current year, Joan's W-2 from the city fire department showed the following wages:
Wages
$ 27,000
Federal Income tax withheld
$ 5,050
State Income tax withheld
$ 1,200
FICA tax withheld
$ 2,066
Noah made some estimated federal income tax payments of $12,000 and estimated state income tax payments of $1,000 during the year.

3. Noah's pet store is located at Santee, Ca, 92071. The name of the store is "The Arc," and its taxpayer ID number is The beginning inventories and ending inventories are both $10,000. The revenue and expenses for the year are as follows:
Sales Revenue
$ 144,000
Expenses:
Cost of Sales
$ 62,000
Insurance
$ 750
Accounting Fees
$ 1,800
Wages
$ 25,000
Payroll Taxes
$ 2,250
Utilities
$ 2,700
Rental expense
$ 7,200
Total Expenses
$ (101,700)
Net Income
$ 42,300

4. Noah and Joan paid the following amounts during the year (all by check):
Political contributions
$250
Church donations (for which a written acknowledgement was received)
$2,300
Real estate taxes on their home
$1,200
Mortgage interest for purchase of home
$ 12,000
Tax return preparation fees
$ 350
Credit card interest
$220
Automobile insurance premium
$600
Uniforms for Joan
$125

5. Noah likes to invest in the stock market. During the year he sold the following securities, none of which were qualified small business companies:
Stock
Blue Co.
02/11/03 (Acquired)
08/15/10 (Sold)
4,500 (Sale Price)
2,300 (Cost Price)
Yellow Co.
01/31/10 (Acquired)
06/05/10 (Sold)
6,000 (Sale price)
5,000 (Cost price)
Red Co.
10/02/04 (Acquired)
10/07/10 (Sold)
12,000 (Sale price)
1,600 (Cost price)
The expenses of sale are included in the cost basis. Noah has a long-term capital loss carryover from last year of $2,300.

6. During the year, Noah and Joan received the following qualifying dividends:
Exxon
$ 320
Coca-cola
$ 268
Texas Utilities
$ 220

7. Noah and Joan own rental property located at, San Diego, CA 92115. The revenue and expenses for the year are as follows:
Rent Income
$ 14,000
Insurance
$ 550
Interest Expense
$ 7,000
Property taxes
$ 1,000
Miscellaneous Expenses
$ 600
Depreciation (The house was acquired in 1990)
$ 3,000
Required:

Although Noah and Joan do not believe their tax return will be unduly complicated, they do realize their limitations and come to you for assistance. You are to prepare their federal income tax return in good form, signing the return as the preparer. Do not complete a California state income tax return. Assume and other information (addresses, etc.) that you may need. The following forms and schedules are required, 2014 edition:
Form 1040, Schedule A, Schedule B, Schedule C, Schedule D, Schedule E, Schedule SE, Form 2441, Form 8949, Qualified Dividends and Capital Gain Tax Worksheet.