Reference no: EM132677245
TAX CASE STUDY-Individual PROJECT
TAX YEAR 2019
Federal Return Only
Robert T. and Lisa J. Smith (ages 52 and 51) are married and live at 5678 Orange Blossom Trail, Dallas, TX 75248. Robert is the regional manager for a software company (SoftWare, INC), while Lisa is a self-employed CPA. They file a joint return and use the cash basis for tax purposes.
1. Robert receives a yearly salary of $99,000, plus an annual bonus, from Software INC. The annual bonus is determined in December of each year but not paid until January of the following year. Robert's bonus is $50,000 for 2018 (received in 2019) and $66,000 for 2019 (received in 2020). Robert contributed $20,000 to the plan in 2018-and Software made a matching contribution of $10,000. The company provides an office for Robert's use that is located at Suite 419, 101 Real Boulevard, Dallas, TX. (you need to determine what the total wages on Form W-2 will be based on the numbers noted above-do not calculate Medicare/social security payments.
2: Lisa is a licensed CPA in Texas who works part-time on a consulting basis. Her major clients are real estate developers (both residential and commercial). Because she limits her engagements, she does not have a separate office but does her work at the client's premises or in her office at home (see item 4 below). Her business expenses for 2019 are summarized below:
Supplies $4,000
Legal $5,000
CPA license fee $1,500
Subscriptions to professional journals $3,500
Dues to professional organizations--- $1,250
10% relates to lobbying and PAC contributions
Purchase of a new computer for the office $5,000
Volunteer teacher at a local university-the fair market value
of the time that she spends is- $20,000
She would have been billing clients an equivalent amount
In addition, she drove the family Acura (purchased on June 7, 2016) 15,000 miles on her job assignments. Regarding the Acura, Lisa uses the automatic mileage method for tax deduction purposes. She drove the car for 25,000 miles during the year.
3. In addition to the above, the Smith's had the following stock transactions during the year:
Stock Date Acquired Date Sold SalesPrice Purchase Price
150 sh Pfizer Corp 5/12/89 8/15/19 $5,000 $3,000
50 sh Allergan 6/10/18 10/23/19 $1,525 $1,800
25 sh ExxonMobil 4/28/18 9/4/19 $1,900 $2,700
60 sh Texaco 9/11/13 10/27/19 $11,410 $9,100
300 sh HulaHoop 1/7/16 12/1/19 $ 6,125 $3,150
4. On August 5, 2010, Robert purchased 3,000 shares of Groupon, Inc common stock for $20 a share as part of its initial public offering. By December 2019, the corporation ended its last game and its stock became worthless.
5. Besides the items previously noted, the Smith's had the following receipts for 2019:
Lisa's consulting income $120,000
Interest income:
City of Dallas bonds $25,000
Ford Motor Company bonds $19,000
Loan repayment by Sarah Duval $30,000
Cash gifts from Lisa's parents $20,000
Federal income tax refund (2018 return) $9,000
6. In addition to the items already mentioned, the Smith's had the following expenditures for 2019:
Life insurance premiums $4,000
Medical and dental expense not covered by insurance $6,000
Medical insurance noted above
Taxes:
State and local sales taxes (actual amount paid) $14,000
Contributions-
Salvation Army (Plano branch) $11,000
Contribution to an indigent local family
that has fallen on hard times $5,000
During 2019, the Smith's had gambling winnings of $8,000 and losses of $15,000-all supported by records.
7. Robert's Form W-2 from Software shows $20,000 withheld for Federal income tax. SoftWare has an accountable expense reimbursement policy. The Smith's also have made 4 quarterly income tax payments of $10,000 each. Lisa's professional activity code is 541310. Relevant Social Security numbers are noted below:
Social Security
Name Number Birth Date
Robert 461-11-1111 07/01/1963
Lisa 461-45-6781 03/20/1965
8. See the K-1 the Smiths received from Oaktree.
REQUIREMENTS FOR TAX RETURN
Prepare an income tax return (with appropriate schedules) for the Smith's "" for 2019.""
Make necessary assumptions for facts not stated in the problem.
Use the forms in the book or online- do NOT use software for this project. Handwritten forms is fine.
Prepare notes/comments on questions for return reviewer-critical part of the submission
This project is like an exam- and do not share your assumptions and/or answers with others. You will be asked to attest to that on the cover sheet-see comments below- that you must attach to your submission.
If a refund results, the taxpayers want it sent to them.
The Smith's do not wish to contribute to the Presidential Election Campaign Fund. In the past several years, they have itemized their deductions from AGI (have not claimed the standard deduction option).