Tax Return Problem #1 Summer 2020
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Tax Return Problem #1
Summer 2020
Marvin Garvin Carvin, lives at #1 Bearcat Blvd., Huntsville, Texas 77341 with his wife Susan M. Carvin. Marvin’s social Security number is 123-45-6789 and his wife’s social security number is 543-86-5600. He was born on September 4, 1990. and Susan was born May 5, 1991. Marvin and Susan filed a joint tax return. They have the following dependents:
During 2019 the Carvins’ furnished over half of the total support of each of the following individuals. Make-up SS #s for dependents:
- Marcus Carvin, son who is 8 years old.
- Perdita Carvin, daughter who is 10 years old.
Marvin is a salesman and earned a salary of $100,000 in 2019.
Susan owns a law practice called Jaguar Legal Services. The business is operated as a sole proprietorship. The business has the following revenues and expenses:
Fee Revenue $150,000
Expenses:
Rent 23,000
Parking Citations 500
Insurance 5,000
Utilities 3,000
Legal Software Subscription 5,000
Bribes paid to local government officials 5,000
Office supplies 3,000
Jaguar Legal Services placed the following items in service for 100% business use in the business.
- Office building costing $200,000 was placed in service on January 1. The land associated with the building is valued at $50,000.
- Computers costing $5,000 was placed in service on June 1. Immediate expensing under section 179 was not elected. The additional first-year depreciation was taken.
3 Office furniture costing $6,000 was placed in service on May 1. Immediate expensing under section 179 was not elected.
Marvin and Susan had Other Income in 2019 as follows:
Interest on bond issued by the city of Huntsville $ 1,000
Interest on bond issued by the city of Conroe $ 5,000
Ordinary dividends received from Jaguar Instruments $ 600
Interest received from Bearcat Credit Union $ 900
Collections on Annuity from Great American 12,000*
Susan was awarded proceeds of $ 30,000
pertaining to a lawsuit relating to physical injuries
received in an automobile accident.
Marvin was awarded proceeds for $ 5,000
a lawsuit pertaining to
defamation of character.
*The Carvins paid $100,000 for the annuity and expect to receive a total of 180 monthly payments of $ 1,000 each.
Investments:
The Carvins purchased 100 shares of Wildcat Corporation stock for $ 5,000 on February 1, 2019 and sold it for $ 10,000 on August 1, 2019.
The Carvins purchased 100 shares of Owl Corporation stock for $ 5,000 on June 1, 2019 and sold it for $ 3,000 on December 31, 2019.
Rental Property
The Carvins’ own a residential home in Florida which was leased for the entire year. The address of the property is 1234 Charger Way, Jacksonville, Florida 32217.
Information pertaining to the property is listed below:
Lease payments received during the year $ 25,000
Mortgage interest $ 8,000
Real estate taxes $ 4,000
Property Insurance $ 800
Repairs $ 4,000
The home has been fully depreciated for tax purposes. Therefore, there is no depreciation deduction pertaining to the property.
After School Care
The Carvins paid $12,000 to the Switzerland Point Childcare Center which provided before and after school care for the couple two children. Switzerland Point Childcare employer identification number is 58-6777789. The childcare is located at 231 St. Johns Avenue, Huntsville, Texas 77341.
Marvin and Susan other expenditures for 2019 are as follows:
Real estate taxes $ 5,000
Home Mortgage Interest $ 6,000
Cash Donations to the Osprey Cancer Society $ 4,000
(Tax-exempt Organization)
Cash Donations to the Sweetwater Baptist Church $10,000
Medical expenses paid $30,000
Texas Sales Tax paid $ 2,000
Federal Income Taxes Withheld from Marvin 2019 Salaries $16,000
Estimated income taxes Paid by Susan $25,000
REQUIRED:
You are to manually prepare in good form Marvin’s 2019 Federal Income Tax Return. You will need Form 1040 and Schedules A, B, C, D, and E. There may be additional forms required to support the information reported on the tax schedules. Go to the IRS website (www.irs.gov) and download the 2019 Forms. You can also download instructions pertaining to completing the forms from the website. Use the tax 2019 tax schedule to calculate tax liability. You will sign the return as income tax return preparer. Your return should be neat. Information should be typed directly onto the tax forms.
Submit your return in following order: Form 1040, Sch A, B, C, D, E followed by your documentation supporting your calculations. Any forms required to document the information reported on the tax schedules should be placed directly behind the tax schedules.
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