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(Solved) Jerry R. (age 52, SSN 367-83-9403) and Janet K. (age 48, SSN 361-73-4098) Apps file a joint return. They reside at 410 E. Vernon Avenue, Carlock,...


Jerry R. (age 52, SSN 367-83-9403) and Janet K. (age 48, SSN 361-73-4098) Apps

file a joint return. They reside at 410 E. Vernon Avenue, Carlock, Illinois 61725-1287.

Use the following information to prepare the Appses' tax return. Use the approach

shown in Examples 10-12 in Chapter 11 to compute the Appses' tax liability

(¶1101.03). They both elect to have $3 to go to the Presidential election campaign fund

and file their return on April 10, 2017.

The Appses' household includes David A. Apps, their 12-year-old son (SSN 965-26-

4381), and Edwin R. Apps (SSN 157-43-2587), Jerry's 78-year-old father. Janet and

Jerry provide over half of the support of both David and Edwin. David has no income

of his own; Edwin received $4,500 in nontaxable social security benefits during the

year.

Jerry works as a carpenter. The information on his Form W-2 is shown below. Jerry is

an active participate in his employer's 401(k) plan. Through his employer, Jerry buys

health care insurance for his family that complies with the ACA mandate.

Taxable wages $150000

Social security and Medicare tax withheld ?

Federal income tax withheld 19000

State income tax withheld 8000

Janet owns and operates J&J Networking. The principal business code is 454390. Janet

has no employer ID number. She uses the accrual basis in her business and the cost

method for valuing the inventory. No changes have been made in the inventory system.

Janet operated her business for all 12 months and has an office in her home that she

uses exclusively and regularly for business. Janet materially participates in the

business. Information relating to her business operation is as follows.

Gross receipts $85,000

Returns and allowances 900

Beginning inventory 2,700

Purchases 28,625

Ending inventory 3,825

Expenses:

Advertising $ 400 Office expense $ 80 Bank service charges 24

Contribution to SIMPLE plan 10,000

Commissions 3,200

Depreciation on equipment

placed in service in 2015 1,700

Dues and publications 220

Insurance (business) 650

Supplies 310 Travel 1,035 Meals and entertainment 490 Business seminars 1,000 Other

business taxes 560 Miscellaneous expenses 35 Postage expense 110

In addition to the above expenses, Janet uses her personal car in her business. She

keeps good records of her business mileage and uses the standard mileage method. The

car was first used in the business on May 1, 2013. During 2016 Janet drove 7,631

miles, of which 1,250 were driven for business. The rest were personal miles.

Information related to the Appses' home:

Total area of home: 3500 sf.

Area used for business:1400

FMV of home, for purposes of Form 8829, line 36:$240000, Adjusted basis of home, for

purposes of Form 8829, line 36 :195000,Value of land, Form 8829, line 37:20000

Year the home office was first placed in service:2010

Mortgage interest:6250

Real estate taxes:2400

Homeowner's insurance:680

Utilities:3200

The Appses own a four-unit apartment building that they actively manage. They paid

$100,000 for the building in 1994. Of this amount, $25,000 was allocated to the land.

The Appses use MACRS to depreciate the building, which is located at 19 Sunset Road

in Carlock, IL 60501. All units were rented for the entire year. Information on the

apartments is shown below.

Rental revenue $23,000

Rental expenses:

Real estate taxes $ 4,800

Utilities 1,780

Insurance 1,550

Cleaning and maintenance 5,200

Legal and professional fees 125

Mortgage interest 7,200

Repairs 4827

Supplies 2325

The Appses had other income consisting of the following. Neither Jerry nor Janet had

any interest in a foreign trust or bank account.

interest from mom : 225

Interest from Champion Savings $2,750

Interest on bonds from the State of Illinois 930

Qualified dividends from General Morris Corporation 425

Qualified dividends from Eagle Corporation 150

Qualified dividends from Roper Corporation 650

unqualified dividends:300

The Appses have a $4,950 long-term capital loss carryover from 2015. They also sold

the following shares of common stock during 2016. No cost basis was provided on any

of the Form 1099-Bs.

Number Date Date Sales of Shares Company Acquired Cost Sold Price

100 Roper  Corp. 5-1-16 $5,000 6-12-16 $7,500

50 Fastco Corp. 2-14-16 $3,250 7-20-16 $12,950

200 Eagle Corp. 3-16-11 $6,200 8-10-16 $8,100

100 South Corp. 3-14-15 $11,500 1-24-16$6,500

A summary of the receipts for payments the Appses made during the year

includes:

Medical expenses (unreimbursed):

Jerry Janet David Edwin Total Prescription medicines $ 50 $ 200 $ 25 $1,000 $1,275

Doctor bills 60 500 30 200 790

Dentist bills 150 40 200 0 390

Hospital bills 0 1,800 0 2,100 3,900

Transportation 8 72 24 16 120

Eyeglasses 0 122 125 0 247

Over-the-counter medicine 0 50 30 70 150

Taxes:

Sales tax $1,200

Balance due on 2015 state income tax return 425

Refund on 2015 federal income tax return 725

Real estate taxes 2,400


Interest:

Mortgage interest $6,250

Credit card interest 975

vacation home interest:1202

Cash contributions:

Church $2,300

United Way 1250

Presidential election campaign 50

In addition to the cash contributions, the Appses donated five shares of S&W common

stock to their church on July 30. The stock had been purchased on December 15, 2014,

for $2,200. The fair market value of the stock on July 30 was $6,000.

Janet and Jerry each contribute the maximum amount allowed for 2016 to their

respective (traditional) IRAs. They also make the following other payments during the

year:

Rental of safe deposit box for securities $ 120

Tax preparation fee (2015 Form 1040) 524

Jerry's union dues 1,200

Automobile registration 150

load to mother $5000,

paid for cemetery plot $2500

Jerry R. (age 52, SSN 367-83-9403) and Janet K. (age 48, SSN 361-73-4098) Apps file a joint
return. They reside at 410 E. Vernon Avenue, Carlock, Illinois 61725-1287. Use the following
information to prepare the Appses’ tax return. Use the approach shown in Examples 10-12 in
Chapter 11 to compute the Appses’ tax liability (¶1101.03). They both elect to have $3 to go
to the presidential campaign fund and file their return on April 10, 2016.
The Appses’ household includes David A. Apps, their 12 year old son (SSN 965-26-4381), and
Edwin R. Apps (SSN 157-43-2587), Jerry’s 78 year old father. Janet and Jerry provide over half
of the support of both David and Edwin. David has no income of his own; Edwin received
$4,500 in nontaxable social security benefits during the year.
Jerry works as a carpenter. The information on his Form W-2 is show below. Jerry is an active
participant in his employer’s 401(k) plan.
Taxable wages
Social security and Medicare tax withheld
Federal income tax withheld
State income tax withheld $150000
?
19000
8000 Janet owns and operates J&J Networking. The principal business code is 454390. Janet has no
employer ID number. She uses the accrual basis in her business and the cost method for valuing
the inventory. No changes have been made in the inventory system. Janet operated her business
for all 12 months and has an office in her home that she uses exclusively and regularly for
business. Janet materially participates in the business. Information relating to her business
operation is as follows:
Gross receipts
Returns and allowances
Beginning inventory
Purchases
Ending inventory
Expenses:
Advertising
Bank service charges
Contribution to SIMPLE plan
Commissions
Depreciation on equipment
placed in service in 2013
Dues and publications
Insurance (business) $85000
900
2,700
28,625
3,825
$400
24
10,000
3,200
1,700
220
650 Office expense
Supplies
Travel
Means and entertainment
Other business taxes
Miscellaneous expenses
Postage expense $80
310
1,035
490
560
35
110 In addition to the above expenses, Janet uses her personal car in her business. She keeps good
records of her business mileage and uses the standard mileage method. The car was first used in the business on May 1, 2012. During 2015 Janet drove 7,631 miles, of which 1,205 were drive
for business. The rest were personal miles.
Information related to the Appses’ home:
Total area of home
Area used for business
FMV of home, for purposes of Form 8829, line 36
Adjusted basis of home, for purposes of Form 8829, line 36
Value of land, Form 8829, line 37
Year the home office was first placed in service
Mortgage interest
Real estate taxes
Homeowner’s insurance
Utilities 3500 square feet
1400 square feet
$240,000
195,000
20,000
2010
$6,250
2,400
680
3,200 The Appses own a four-unit apartment building that they actively manage. They paid $100,000
for the building in 1994. Of this amount, $25,000 was allocated to the land. The Appses use
MACRS to depreciate the building, which is located at 19 Sunset Road in Carlock, IL 60501. All
units were rented for the entire year. Information on the apartments is shown below.
Rental revenue
Rental expenses:
Real estate taxes
Utilities
Insurance
Cleaning and maintenance
Legal and professional fees
Mortgage interest
Repairs
Supplies $23000
4,800
1,780
1,550
5,200
125
7,200
827
325 The Appses had other income consisting of the follow. Neither Jerry nor Janet had any interest in
a foreign trust or bank account.
Interest from mom
Interest from Champion Savings
Interest on bonds from the State of Illinois
Qualified dividends from General Morris Corporation
Qualified dividends from Eagle Corporation
Qualified dividends from Roper Corporation
UnQualified dividends 225
$2,750
930
425
150
650
300 The Appses have a $4,950 long-term capital loss carryover from 2014. They also sold the
following shares of common stock during 2015. No cost basis was provided on any of the Forms
1099-B.
Number of
shares
100
50
200
100 Company
Roper Corp.
Fastco Corp.
Eagle Corp.
South Corp. Date
Acquired
5/1/16
2/14/16
3/16/11
3/14/16 Cost
$5,000
3,250
6,200
11,500 Date Sold
6/12/16
7/20/16
8/10/16
1/24/16 Sales
Price
$7,500
12,950
8,100
6,500 A summary of the unreimbursed payments the Appses made during the year includes:
Prescription meds
Doctor bills
Dentist bills
Hospital bills
Transportation
Eyeglasses
Over the counter meds Jerry
Janet
David
Edwin
Total
$50
$200
$25
$1,000
$1,275
60
500
30
200
790
150
40
200
0
390
0
1,800
0
2,100
3,900
8
72
24
16
120
0
122
125
0
247
0
50
30
70
150 Taxes:
Sales tax
Balance due on 2014 state income tax return
Refund on 2014 federal income tax return
Real estate taxes $1,200
425
725
2,400 Vacation home interest
Mortgage interest
Credit card interest 1202
$6,250
975 Interest: Cash contributions:
Church
United Way
Presidential election campaign $2,300
1250
50 In addition to the cash contributions, the Appses donated five shares of S&W common stock to
their church on July 30. The stock had been purchased on December 15, 2013, for $2,200. The
fair market value of the stock on July 30 was $6,000.
Janet and Jerry each contribute the maximum amount allowed for 2015 to their respective
traditional IRAs. They also make the following other payments during the year:
Rental of safe deposit box for securities
Tax preparation fee (2014 Form 1040)
Jerry’s union dues
Automobile registration
Loan to mother
Paid for cemetery plot $120
524
1,200
150
5000
2500

 


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