I:7-63 Following is a list of information for Peter and Amy Jones for the current tax year. Peter and Amy are married and have three children, Aubrynne, Bryson, and Caden. They live at 100 Main Street, Anytown, USA 00000. Peter is a lawyer working for a Native American law firm. Amy works part-time in a genetic research lab. The Jones’ Social Security numbers and ages are as follows:
ReceiptsPeter’s salary$70,000Amy’s salary32,000Interest income on municipal bonds2,400Interest income on certificate of deposit (Universal Savings)3,100Dividends on GM stock1,600
DisbursementsEyeglasses and exam for Aubrynne$ 600Orthodontic work for Bryson to correct a congenital defect2,500Medical insurance premiums, after-tax basis1,800Withholding for state income taxes7,200Withholding for federal income taxes16,000State income taxes paid with last year’s tax return (paid when the return was filed in the current year)500Property taxes on home1,100Property taxes on automobile300Interest on home9,700Interest on credit cards200Cash contribution to church3,900
In addition to the above, on September 17, Peter and Amy donate some Beta Trader, Inc. stock to Lakeville Community College. Beta Trader, Inc. is publicly traded. The FMV of the stock on the date of the contribution is $700. Peter and Amy had purchased the stock on November 7, 2003 for $300.
Compute Peter and Amy’s income tax liability for the current year using Form 1040, Schedules A and B, and Form 8283, if necessary.
I:7-64 Kelly and Chanelle Chambers, ages 47 and 45, are married and live at 584 Thoreau Drive, Boston, MA 59483. Kelly’s Social Security number is 111-11-1111 and Chanelle’s is 222-22-2222. The Chambers have two children: Emma, age 23, and Chet, age 19. Their Social Security numbers are 333-33-3333 and 444-44-4444, respectively. Emma is a single college student and earned $8,000 during the summer. Kelly and Chanelle help Emma through school by paying for her room, board, and tuition. Emma lives at home during the summer. Chet has a physical handicap and lives at home. He attends a local university and earned $4,000 working for a marketing firm. In sum, Kelly and Chanelle provide more than 50% of both Emma’s and Chet’s total support for the year.
Kelly is a commercial pilot for a small airline. His salary is $95,000, from which $19,000 of federal income tax and $8,000 of state income tax were withheld. Kelly also pays premiums for health, disability, and life insurance. $2,000 of the premium was for health insurance, $250 for disability, and $400 for life insurance.
Chanelle owns Alliance Networks, a proprietorship that does network consulting. During the year, Chanelle’s gross revenues were $23,000. She incurred the following expenses in her business:
Liability insurance$ 700Software rental5,400Journals and magazines150Training seminars1,200Supplies1,300Donations to a political campaign fund800
Kelly enjoys playing guitar and plays in a band. Kelly’s band has developed a local following. This year, his gross revenues were $1,200 for playing shows and $700 on CD sales. He incurred the following expenses:
Studio rent expense$1,300Sound system repairs200CD production500New guitar and amplifier800
Kelly’s father passed away during the year. Kelly and Chanelle received $100,000 from the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums.
Chanelle purchased 100 shares of Thurston Co. stock on May 1, 1991, for $1,000. Thurston Co. was declared bankrupt during the current year.
Chet’s physician recommended that he see a physical therapist to help with his disability. Kelly paid the therapist $7,000 during the year because his insurance would not cover the bills.
Kelly and Chanelle went to Las Vegas and won $5,000 at the blackjack table. The next night, they lost $6,000.
Kelly and Chanelle gave $900 to their church and, during the year, they had the following other income and expenses:
Real estate taxes$1,400Property taxes on car (determined by value)500Home mortgage interest9,000Credit card finance charges2,600Tax return preparation fees ($600 is allocable to Chanelle’s business)1,000Sales tax on purchases during the year6,200Interest from a savings account800Interest from City of Boston Bonds700Dividend from 3M stock400
Prepare Kelly and Chanelle’s tax return Form 1040 and Schedules A, B, C, D, and SE for the current year