TAX Return Project PDF

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1040 Project...

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TAX RETURN PROJECT

ACCT 6350.501 F18 Team Number: 2 Date submitted: November 5th, 2018 Team members: 1. (Pham) Tuyen 2. (Shallah) Mohammad Hamza

I did not seek assistance of any other student, friend, and colleague or use the solution manual in the completion of this assignment

Student signature:_____________________________

Student signature:_____________________________

Memo Notes:

1. The 1040 tax return form used should be indicated year 2016 not 2017 since the client is filing for 2016. 2. Line 7 on form 1040 is not correct. We have to ask client what type of contribution for the amount $20,000 because there is a limitation for each type of retirement plan. We assume client told it was a contribution 401(k). So $20,000 is deduct from the income. Line 7 only report $119,000 (89,000+ 50,000 - 20,000). 3. Line 4 on sch B should be $26,715 and report on form 1040 line 8a since the $25,000 interest from City of Dallas is tax exempt. However the $25,000 of interest from taxexempt should be reported on 1040 line 8b with the amount of $25,000 4. Lisa consulting income must have been reported on Schedule C line 1 at $120,000. The amount of $120,000 was wrongly added to form 1040 line 7 wages and must be removed. Question to Client “Lisa”: is the $7,000 payment received in 2016 for work done in 2015 included in the $120,000 total consulting income. 5. The loan repayment $30,000 by Sarah Duval is exempt because the amount less than $100,000. 6. Lisa had no insurance expense in 2016 for her business, however, the 1040 report shows a $5,000 insurance expense which is wrong. We have to ask Lisa if purchase a new laptop will qualify bonus depreciation and assume it’s qualified asset, so she can deduct $2500 for depreciation, but she has to attached form 4562. Lisa volunteered as a teacher for a local university with a fair value of $20,000. This transaction is not deductible since it is not related to her business. Moreover, the 1040 report shows a $20,000 deduction for legal and professional services in line 17 which is wrong and must be removed. 7. We have ask Lisa questions about regular and exclusive use, principal place of your business and decided the room qualified for home office deduction. On form 8829, $23,000 interest on home mortgage is on wrong column; it has to be on line 10 column (b).

8. For stock sales, the Pfizer Corp had a 2 for 1 stock split in year 2000. Since the total basis for 150 stocks is $1,300, and the total stocks that Smith’s sold in 2016, the basis or cost of stocks should be reduced to $650 instead of $3,700 in form 8949 page 2. 9. Question to Client: Does the family provide more than 50% of support to Tyler or did Tyler support himself from his own money. (qualified child support test) 10. Since the Smith’s made 4 estimated tax payments worth $40,000 total, it should be included in form 1040 line 65 for a total of $40,000. 11. Line 21 other income is wrong. Client has to report the winning amount of $8,000 and can deduct $8000 as a loss on line 28 sch. A. 12. On line 1 sch A, client can only deduct $20,000 for medical and dental expense. $4000 of life insurance premium is not deductible. 13. For charitable contributions, the smith’s can only deduct a total of $21,000 ($11,000 for salvation army and $10,000 for Goodwill industry). On schedule A line 16, the total should be $21,000 worth of contribution. 14. Since Robert incurred more employee expenses ($20,000) than he was actually reimbursed for ($15,000), he can deduct $5,000 on schedule A line 21 for a total of $5,000. 15. We have to ask client if her gift is exceed $5.45 million or not for the year they received it. Assume client told it’s not exceed, so $20,000 is not taxable but they have to file form

709. 16. The amount on form K-1 should report and attached form as below: ● $7,000 on line 1 sch K-1 will report on line 28 column g on sch E ● $640 on sch K-1 will report on line 38 sch E ● $56 on sch K-1 will report on line 1 form 6781 ● $739 on sch K-1 will report on line 23 sch A - not the amount $4,989 ● $21,031 (=16,541-122+4612+323+432) on sch K-1 will report on line 1a form 1116 ● $38 on sch K-1 will report on line 8b form 1040...