Reference no: EM131864507
Alice J. and Bruce M. Jones (cash basis taxpayers) are married and reside in Westchester at 22 William Street, White Plains, NY 10602. Alice’s birthday is September 21, 1965 (SSN: 233-45-0098), and Bruce’s is June 27, 1963 (SSN: 109-339923). Alice is the office manager for NY Dental Clinic. Bruce is the manager of Superfast Burgers, a fast food outlet owned and operated by Burgers First Corporation.
The Jones has two children, Cynthia (born January 25, 2002, Social Security number 017-44-9126) and John (born February 7, 2001, Social Security number 017-27-4148), both of whom live with them, except when away on summer vacation visiting Alice’s sister in France. To assist in saving for her college tuition, Cynthia earned $4,800 from babysitting in 2016. John earned $1,500 from a part-time job 2016 which he used to buy baseball cards. The Jones’ also have legal custody of Elizabeth James, their niece, (born April 14, 2009, SSN: 223-33-4432) who lived with them since birth. Elizabeth James earned 47,750.00 in 2016 from child modeling, all of which was placed in trust for future benefit by her court appointed guardian.
The Jones provided more than half the support for Joanne Madison (SSN: 66999-8876), Bruce’s 60-year-old aunt and her son, William Madison (SSN: 767-75-9090). Neither Joanne nor William had any income in 2016. During 2016, both Joanne and William lived together in Brooklyn NY.
Other relevant information:
• Bruce has decided that he wants to minimize his tax liability as much as legally possible and has requested your assistance in preparing his 2016 Federal income tax return.
• Bruce and Alice earned and received $2,500 interest income from a savings account at Chase Bank in 2016.
• Alice earned interest of $1,250.00 from United States Treasury bonds, and $4,800.00 from State of NYS HWY Bonds in 2016. Only $2,400 of the NYS HWY bond interest was paid in 2016; the balance ($2,400.00) was paid on January 01, 2017.
• On January 29, 2016 Bruce received a stock dividend from Citibank. The FMV on the date the stock received was $7,150.00. The stock was purchased on November 30, 2015. The record date was December 27, 2015. Bruce also received an option of choosing to take the stock or cash equal to the fair market value of the stock on January 29, 2016.
• In 2016, Bruce paid $44,000.00 in alimony to his ex-wife, which will decrease to $20,000 on November 15, 2018, when his son Bruce, Jr. turns 21. Bruce, Jr. is a full time student and is claimed as a dependent on his mother’s tax return.
• On December 31, 2016, Alice received a check for $23,500 from BATA Title Agency LLC for consulting services performed during the year. The check was dated December 31, 2016, but the company asked Alice to hold the check until January 05, 2017. Although BATA Title Agency LLC had a zero dollar balance in its’ checking account on December 31, 2016, the company had a line of credit with the bank, which ensured that all checks written by BATA would be honored up to the company’s credit limited of $50,000. As of December 31, 2016, the available balance on the credit line was $28,275.00.
• On April 24, 2016, Alice found a gold watch, which she reported to the police. The Police held the watch for sixty days to see if someone would claim it, but no one came forth. On June 25, 2016, the police returned the watch to Alice to keep. The Watch was valued at $15,500 on June 25, 2016. Alice sold the watch on December 15, 2016 for $19,250.00.
• On December 31, 2016, Bruce received a check in the amount of $75,000.00 from Mutual of America for life insurance benefits from his brother who recently died and had named Bruce as the sole beneficiary. The check was dated December 30, 2016, but Bruce decided not deposit the check until January 03, 2017.
• The Jones had been in negotiations with Bank of America to reduce the excessive amount of credit card debt they had accumulated over the past several years. Finally, on December 28, 2016, Bank of America forgave $11,725.00 of credit card debt.
• Bruce and Alice 2016 W-2 statement shows the following wages and withholdings: Bruce Alice 1) Wages $75,000 $50,000 2) FWT 10,200 5,300 3) SWT 6,000 3,700 4) CWT 3,300 2,500
• The Jones also paid the following personal expenses in 2016:
a. Contributions to Church (50% Limitation) $8,250 b. Student loan Interest $4,700
Instructions: Make realistic assumptions about any missing or inconsistent data and state your assumptions on a separate typed schedule.
Required:
i. Prepare form 1040 for Bruce and Alice only, including all schedules and forms for 2016. (Do not prepare NYS or NYC tax returns).