42. Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with
Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth’s birthday is July 4, 1971, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Beth’s 2012 Wage and Tax Statement (Form W–2).
Line Description Amount
1 Wages, tips, other compensation $63,000.00
2 Federal income tax withheld 10,500.00
3 Social Security wages 63,000.00
4 Social Security tax withheld 2,646.00
5 Medicare wages and tips 63,000.00
6 Medicare tax withheld 913.50
15 State Arizona
16 State wages, tips, etc. 63,000.00
17 State income tax withheld 1,650.00
Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a
Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth’s dividend payments on a Form 1099–DIV.
Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2012. On her 2011 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.
Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, 2012, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.
Beth bought a used sport utility vehicle for $6,000 on June 5, 2012. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On
November 2, 2012, she sold the vehicle to a friend for $6,500.
On January 2, 2012, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2012, for $55 a share.
During 2012, Beth received royalties of $16,000 on a software program she had written.
Beth incurred the following expenditures in connection with her software-writing activities.
Cost of personal computer (100% business use) $7,000
Cost of printer (100% business use) 2,000
Fee paid to computer consultant 3,500
Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. This equipment and furniture was placed in service on January 15, 2012.
Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.
During 2012, Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320.
Beth contributed $30 each week to her church and $10 each week to the United
Way. Professional dues and subscriptions totaled $350. Beth maintained her sales tax receipts, showing total purchases of $1,954.
Beth paid $1,000 in estimated Federal income taxes throughout the year.
Part 1—Tax Computation
Compute the 2012 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms 1040, 2106–EZ, and 4562 and Schedules A,
B, C, D, and SE. Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning
Beth is anticipating significant changes in her life in 2013, and she has asked you to estimate her taxable income and tax liability for that year. She just received word that she has been qualified to adopt a 2-year-old daughter. Beth expects that the adoption will be finalized in 2013 and that she will incur approximately $2,000 of adoption expenses. In addition, she expects to incur approximately $3,500 of child and dependent care expenses relating to the care of her new daughter, which will enable her to keep her job at Mesa Manufacturing. However, with the additional demands on her time because of her daughter, she has decided to discontinue her two part-time jobs (i.e., the part-time tax practice and her software business), and she will cease making estimated income tax payments. In your computations, assume that all other income and expenditures will remain at approximately the same levels as in 2012.
43. Tim and Sarah Lawrence are married and file a joint return. Tim’s Social Security number is 123-45-6789, and Sarah’s Social Security number is 111-11-1111. They reside at 100
Olive Lane, Covington, LA 70434. They have two dependent children, Sean and Debra, ages 12 and 16, respectively. Sean’s Social Security number is 123-45-6788, and Debra’s
Social Security number is 123-45-6787. Tim is self-employed as the sole proprietor of an unincorporated business, and Sarah is a corporate executive. Tim reports the following income and expenses from his business.
Gross income $325,000
Business expenses 201,000
Records related to Sarah’s employment provide the following information.
Unreimbursed travel expenses (including $200 of meals) 1,100
Unreimbursed entertainment expenses 500
Other pertinent information follows.
Proceeds from sale of stock acquired on July 15, 2013 (cost of $12,000), and sold on August 1, 2013 9,800
Proceeds from sale of stock acquired on September 18, 2012 (cost of $5,000), and sold on October 5, 2013 $ 3,800
Wages paid to full-time domestic worker for housekeeping and child supervision 10,000
Interest income received 7,000
Total itemized deductions (not including any potential deductions above) 27,900
Federal income tax withheld 31,850
Estimated payments of Federal income tax 34,000
Compute the 2013 net tax payable or refund due for Tim and Sarah Lawrence.