INDIVIDUAL TAX RETURN PROJECT SALLY JENKS INDIVIDUAL FEDERAL

INDIVIDUAL TAX RETURN

PROJECT

SALLY JENKS INDIVIDUAL FEDERAL

INCOME TAX RETURN

2015-2016 ANNUAL EDITION

ALL DATES RELATE TO YEAR 2015 UNLESS STATED OTHERWISE

Sally A. (age 47), SSN 111-22-1111, is a widow of Robert Jenks, SSN 123-45-6787, who passed

away on March 19, 2012. Sally resides at 23 Ottawa Street, Portland, ME 04112. Sally works

part-time as a Bookkeeper at a local CPA Firm (John Smith CPA) and is also self-employed.

She owns her own Bookkeeping business that she operates in town.

The following filing information relates to Sally:

• Sally is not sure what filing status she should be in 2015 since her husband passed away in

2012.

• Sally elects to contribute to the Presidential Election Campaign Fund.

• Sally is a calendar year taxpayer.

• Sally follows the cash basis method.

• Sally prefer that any tax overpayment to be refunded to her.

• Round all cents to the nearest dollar (Round up .50 Round down .49) No cents on the return.

1. Sally’s annual salaries from John Smith CPA is included on the attached W-2’s. John Smith

CPA does not provide any retirement benefits. Sally has a retirement account that she

contributes to through her business.

2. Sally is a bookkeeper who owns a bookkeeping business called “Add-it-Up”. Sally rents

office space in the Old Port, on 45 Commercial Street, Portland, ME 04112. She also makes

deliveries of monthly accounting records to her clients. She uses her personal car to make the

deliveries. Her professional activity code is 541219 and her employer identification number is

04-9876543. Her clients consist of small to medium size local businesses. Sally collected

$101,874 in revenues during 2015. This total includes a $1,750 payment for work she performed

in 2014 and does not include $5,000 she billed in December for work performed in late 2015. In

addition, Sally has an unpaid bill from a client for $3,200 for work she performed in 2013. This

client has not been heard from since December 2013. Sally has tried to locate this individual to

no avail. Sally feels certain that she will never collect the $3,200 she is owed.

Her business expenses for 2015 are as follows:

Wages $37,875

Entertainment (on perspective clients) 2,200

Office Expense 11,700

Advertising 1,987

Legal Fees 975

Utilities 2,125

Speeding Ticket 275

Rent 7,000

Health Insurance (this policy covers the whole family) 5,200

Business portion of Repairs, Gas and Oil on Toyota 1,750

In addition, Sally drove her 2013 Toyota (purchased on June 1, 2013) 1,925 miles to deliver

accounting records to her clients. Sally does not know if she can take the standard mileage,

actual cost allocated to the car or both. Sally drove the car a total of 10,500 miles in 2015.

Sally utilized the following assets in her bookkeeping business:

Description Date Placed Adjusted Basis when Business

of Property: into Service: Placed into Service: Use:

Computer 7/1/13 $2,110 100%

Printer 7 /7/14 3,250 100%

Filing Cabinets 1/21/14 2,950 100%

Laptop 2/9/15 2 ,510 100%

Monitor 8/28/15 1,875 100%

All of the assets listed above were purchased new by Sally on the date they were placed into

service. For Assets placed in service in 2015, Sally elected the cost recovery method that

yielded the highest possible cost recovery deduction method for that year.

For assets purchased prior to 2015, all of these assets were depreciated under the MACRS

method (None were depreciated under Section 179). For each year of acquisition, the highest

possible deduction under MACRS was elected. Accordingly the expense method of §179 was

not elected.

No additional first year depreciation was taken in any year.

3. In November 2013 Sally was hit by a car while walking her dog. The driver of the car was at

fault and Sally sued the driver for various damages. Sally spent some time in the hospital to

recover from her injuries. The court case didn’t start until September 2014 and in early 2015

Sally won the case. The driver of the car was determined to be at fault and Sally was award

damages totaling $215,000. The damages awarded were $200,000 for personal injury, $5,000

for punitive damages against the driver and $10,000 for loss of income because her injuries

prevented her from working for some time.

4. A. Sally sold stock that was reported on Form 1099-B (attached to the back of this packet)

B. Sally also sold the following capital assets which are not reported on and Form

1099-B:

• 600 shares of KitKat Corp. The shares were purchased by Sally for

$2,150 on the New York Stock Exchange on January 15. They were sold

on the New York Stock Exchange for $2,750 on November 5.

• 1,820 shares of 5 Cent Bank. These shares were distributed to Sally from

the estate of Robert on July 28, 2010. The shares were worth $19,850 as

of the date of Robert's death but were worth $18,900 on the date of

distribution to Sally. Sally, acting as the executrix of Robert's estate did

elect the alternate valuation method. Robert bought the shares for

$12,888 on October 12, 1992. Sally sold the shares to an unrelated party

on May 15 for $17,630.

• 400 shares of Hershey Corporation. These shares were received by Sally

as a gift from her sister on August 17, 2005. Her sister's basis in the stock

at the time of the gift was $5,980. The fair market value of the stock at the

time of the gift was $8,800. No gift tax was paid on the transfer. The

shares were sold to an unrelated party on September 9 for $7,400.

• 9,700 shares of Boston Bay. The shares were purchased by Sally on

January 12, 2010 for $3,100. During 2015, Boston Bay declared

bankruptcy and liquidated. No assets were transferred to the shareholders

during the liquidation.

• Sally has a long-term capital loss carryover of $2,500 from 2014

All of the capital assets listed above were held by the Sally for investment purposes.

5. In early 2015, Sally learned that her cousin, Billy, who borrowed money to open a new

business passed away. Sally loaned Billy $2,000 to help with the new business. Sally had him

sign a note due in one year. Shortly after Sally loaned the money to Billy, he passed away. As of

December 2015, Sally has been told that there will be no payment on the note and it is

completely worthless.

6. Besides the items previously noted, the Sally had the following receipts for 2015:

Interest income:

City of Portland bonds $1,400

Apple Corporate bonds 475

5 Cent Bank 440 $ 2,315

Cash gifts from Sally’s parents 15,000

Federal income tax refund (2014 return) 1,280

Gambling Winnings 3,250

Sally was the beneficiary of a life insurance policy that his uncle purchased on his own life.

Sally’s uncle passed away on April 2. Sally collected $60,000 from the life insurance policy on

November 1.

7. In addition to the items already noted, the Sally had the following expenditures for 2015:

Sally’s contribution to her Keogh Plan/SEP Plan $5,000

Gambling loss 4,500

Life insurance premiums 2,400

Medical and dental expenses for Sally 7,500

Medical expenses paid by Sally for Melissa 4,025

Taxes:

Taxes on Real Estate $3,525

Ad valorem taxes on personal property 820

State and local sales taxes 3,100 7,445

Interest paid on VISA credit card during the year 2,005

Interest paid on Sally’s car 1,750

Principle payments on Sally’s car loan 2,450

Cash Contributions:

Salvation Army (Maine branch) 3,000

Charity located in Canada 500

Cash given to a local family 300

Wyoming governor’s election campaign fund 350 4,150

The life insurance premiums relate to the universal life insurance policies that Sally owns. The

first beneficiary on both policies is Sally’s daughter. Sally contributed to the governor’s

campaign fund because she thinks his influence is key in getting business.

8. Sally house was burglarized on March 5 and her diamond necklace was stolen. Sally's

necklace was worth $33,000. Sally bought the necklace on November 9, 2010 for $15,500. The

necklace was never recovered. Insurance recovery was limited to $5,000.

9. Relevant Social Security numbers are as follows:

Name and Social Security Number

• Jake Ray Jenks, SSN 123-45-6783, son of Sally. Born December 3, 1992.

Full-time student at the University of Maine before graduating in May of 2015.

Jake lives with Sally and Sally provided 60% of his support. His income

consisted of wages of $19,000.

• Ronald Jenks, SSN 123-45-6784, son of Sally. Born August 2, 1993. Ronald works full

time in a restaurant. Sally provides 40% of his support while Ronald provides 30% and the

balance came from other sources. Ronald lives with Sally. His income consisted of wages

of $27,000.

• Roberta Jenks, SSN 123-45-6785, daughter of Sally. Born November 1, 1994.

Full-time student at UVM before graduating in May of 2015. Continued her

education full time at the UMass Medical School as a medical student. Sally

provided 70 percent of her support. Her income consisted solely of $10,000

earned from a part-time job in the medical field. She did live with Sally for the

year.

• Melissa Jenks, SSN 123-45-6786, daughter of Sally. Born May 12, 1996. Full-time

student at the University of New Hampshire. Sally provided 100 percent of her support.

She earned no income. She lived with Sally for the year.

Sally also supported the following person:

• Lillian Mainville, mother of Sally, SSN 123-45-6787. Widow. Born September 12, 1936.

Resided in Clearwater, Florida. Sally provided 85 percent of her total support. Her sole

income consisted of $4,775 of pension income and $8,000 of Social Security benefits.

• Bernard Ray, cousin of Sally, SSN 123-45-6788. Widower. Born April 21, 1961.

Lived with Sally all year long. Sally provided 65 percent of his total support. His sole

income consisted of $9,100 of Social Security benefits

10. Sally made the following deposits with the United States Treasury for their

Federal income tax liability from their own personal checking account on the

dates indicated:

• April 17, 2015 $500

• June 15,2015 500

• September 17, 2015 500

• December 15,2015 500

11. All source documents for wages, dividends, stock sales and interest paid are at the end.

These items are not reported in any of the information above. Ignore the year on the source

documents and assume that they are all for the tax year 2015.

REQUIREMENT

Prepare the Federal income tax return with all supporting schedules and

attachments for Sally and Sally Frost for 2015. Specifically, submit the

following completed forms with required schedules:

• Form 1040: U.S. Individual Income Tax Return

• Form 1040 Schedule A: Itemized Deductions

• Form 1040 Schedule B: Interest and Ordinary Dividends

• Form 1040 Schedule C: Profit and Loss from Business

• Form 1040 Schedule D: Capital Gains and Losses

• Form 1040 Schedule SE: Self-Employment Tax

• Form 4562: Depreciation and Amortization (For Schedule C)

• Form 4684: Casualties and Thefts

• Form 8949: Sales and Other Dispositions of Capital Assets

Use all opportunities to minimize tax liability. In this regard, assume that the

Sally always prefer to forego potential future tax savings in favor of current year

tax savings.