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Tax Project

Fundamentals of Taxation

ACCT 3350.PP2

14 October 2017

Team 10

(Dimou), Afthimios


(Ricciardi), Alessandro

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

(Dimou), Afthimios

(Ricciardi), Alessandro
Family Tax Return The Smith Family

Roberts salary in 2016 consisted of $99,000 being a regional manager at SoftWare, Inc. During
the 2015 year, Robert received a bonus of $50,000 that was not tangibly received until 2016.
Therefore, his W-2 box states $149,000 for 2016.

Robert also contributed $20,000 to a plan which was unspecified. To the best of our knowledge,
we have assumed that he is contributing into a traditional IRA. With a traditional IRA, the
deductions are capped at a maximum of $6,500, leaving $13,500 that will not be deductible.
SoftWare, Inc. also matched contributions of $10,000 to this traditional IRA but as stated earlier,
our cap for deductions has been reached at $6,500 already.

Robert was reimbursed $8,000 of $20,000 spent in 2016 for employment-related expenses. Only
$7,516 of the remaining $12,000 of non-reimbursed employment-related expenses were able to
be deducted on his return. Robert also wanted to include a $2,000 traffic violation fine but the
fee was due to his own fault and cannot be included as a business expense.

Lisa had subscriptions to professional journals totaling $3,500. Since this is a related work
expense, we were able to deduct the $3,500 plus an additional $1,500 that covered her CPA
license fee. Lisas legal fees consisted of $5,000 for 2016. Below shows the total summary of
Robert and Lisas occupational expenses.

Since Lisa is opting to use the standard deduction instead of her itemized deduction, her mileage
(32% of total miles used in 2016) on using the Acura for business related purposes is too low to
quantify expensing it.

The simplified method allows her to to receive a capped deduction of $1,500 per year even
though she could definitely save more by itemizing. The hassle to itemize her deductions did not
seem worthwhile for her.

Lisa asked us to use the simplified method in regards to her home office. Since no time was
specifically stated in regards to her business and personal use of the office we made the
calculation of 75% of the time as business use.

Ad valorem taxes and interest on the home mortgage are $10,000 and $23,000 respectively
totaling a deduction of $33,000 which we included on their return.
Lisa had a personal auto in which she paid $10,000 for in 2016. We inquired about the exact
vehicle and was notified that it was a 2011 Toyota Prius. This vehicle qualifies for the Qualified
Plug-in Electric Drive Motor Vehicle Credit which gave her a credit of $7,500. Win for Lisa!

We dont have enough information to determine whether Polk is her madden name or a client
and therefore have left the stock transactions out.

In regards to Roberts 3,000 stock purchase of Netflix, this item is deemed worthless due to the
value dropping to zero. This is simply a loss that Robert will have to eat.

Lisa had consulting income of $120,000 along with two interest incomes valuing a total of
$44,000. A federal income tax refund from 2015 was included in her income adding an
additional $9,000. The gift from her parents ($20,000 cash throughout the year) will be excluded
since its under the threshold of $28,000 (both parents). The $30,000 in loan repayments has
potential for deductions but due to lack of information given it will be ignored.

Lisas consulting income of $7,000 from 2015 was included in her return for 2016 since we are
using cash basis. The other $15,000 she billed will not be included as she doesnt receive it until
2017. The remaining $4,999 that is due from a person convicted of arson deems enough reason
to regard as bad debt and will not be included in her income.

The multiple contributions raise multiple questions. Since $10,000 contribution was towards an
election campaign, it is questionable to have it as a charitable contribution. Thus will not be
allocated. Contributions to Canada will not be deductible due to its obvious location. The only
contribution deemed worthy to be noticed is the Salvation Army of $11,000 in which $3,778 will
be applied to their refund because of it.
Since the Smiths gamblings resulted in no gains (winnings of $8,000 and losses of $20,000)
and no losses can be recovered on this it was not reported on their return.

We included the Smiths partnership Schedule K-1 (Oaktree Capital Group) on their return by
entering the appropriate information given by our client. Ordinary income was $7,000.

The Smiths have two children living in their household, Tyler and Anna Marie. The two
children are classified as dependents for the Smiths tax return. Tyler having received $17,200
during the year of 2016 means he should file another tax return for himself because he has
surpassed the $10,400 earnings cap.

The Smiths also made 4 quarterly income tax payments of $50,000 and has been inputted into
their return.

TurboTax was used to complete this tax return. Attached below are more screenshots concerning
the Smiths tax return.