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(solution) Alice J. and Bruce M. Smith are married taxpayers who file a

Alice J. and Bruce M. Smith are married taxpayers who file a joint return. Their social security numbers are 123-45-6789 and 111-11-1111, respectively. Alice?s birthday is September 21, 1965, and Bruce?s is June 27, 1964. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic. Bruce is the self-employed physical therapist. The following information is shown on Alice?s Wage and Tax Statement (Form W-2) for 2015. Line Description Alice 1. Wage, tips, other compensation $58,000 2. Federal income tax withheld 4,500 4. Social security tax withheld 2,436 6. Medicare tax withheld 841 17. State income tax withheld 950 During 2015, Bruce recorded the following items of his business: Revenue from patient visits $270,000 Property tax on the office 4,500 Mortgage interest on the office 12,000 Depreciation on the office 5,500 Malpractice insurance 37,500 Utilities paid for the office 13,750 Office staff salaries 51,000 Rent payments on equipment 15,000 Office magazine subscriptions 150 Medical journals 250 health insurance premium paid for himself 2,500 health insurance premium paid for his employees 5,000 The Smiths provide over half of the support of their two children, Cynthia (born January 25, 1989, Social security number 123-45-6788) and John (born February 7, 1993, Social Security number 123-45-6786). Both children are full-time students and live with the Smiths except when they are away at college. Cynthia earned $4,200 from a summer internship in 2014, and John earned $3,800 from a part-time job. During 2015, The Smiths furnished 60% of the total support of Bruce?s widower father, Sam Smith (born March 6, 1936, social security number 123-45-6777). Sam died in November, and Bruce, the beneficiary of a policy on Sam?s life, received life insurance proceeds of $800, 000 on December 28. The Smiths also made some investment activities during 2015. The following information is shown their investment income / (loss) for 2014. Dividend income (qualified dividend) from investing in Apple Inc. $200 A gain from selling Netflix stock (hold for 7 months) 5,000 A loss from selling Bank of America stock (hold for 15 months) (1,500) An non-business bad debt (2,000) The Smiths had the following expenses relating to their personal residence during 2015 Property Taxes $5,000 Qualified interest on home mortgage $8,800 Medical expense for 2014: Medical insurance premium paid for two children Doctor bill for Sam Operation for Sam Hospital expense for Sam $4,500 7,600 8,500 3,500 Utilities 4,100 Union dues paid by Alice 600 Alice?s work uniform expenses 450 Prepare the Federal income tax return of 2015 for the Smiths. You will include Form 1040, Schedule C, and Schedule A. The following important learning objectives are covered in this tax return project: Determine gross income (e.g. life insurance proceeds) Calculate Business income (using Schedule C) Determine qualifying child and qualifying relative Determine the amount of itemized deductions (e.g. medical expenses) Personal and dependent exemptions Capital gain/loss Calculate taxes Hint: the different tax treatments should be applied to the following items Health insurance premium paid for Bruce Smith Health insurance premium paid for Bruce?s employees Health insurance premium paid for Alice and Children, and medical expenses paid for taxpayers and family members


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Jan 30, 2021





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