Tax return

2016 INFORMATION – MICKEY AND JENNY MCDONALD

Mickey – birth date 1/1/1970 SSN: 111-22-3333

Jenny – birthdate 2/2/1972 SSN 222-66-8888

Ronnie, son, birthdate 2/2/2012 SSN 333-44-5555

Income:

See W-2

Interest Income from Bank of America $1,000

Interest income from State of Maryland Bond $800

Dividends from Mickey’s Burger Palace – See Form 1099 DIV

100 shares of Mickey’s Burger Palace – bought on 1/1/2007 for $10,000, sold 7/1/16 for $5,000 – the

basis was reported to the IRS.

Jenny works as a self-employed accountant:

Cash Receipts: $23,000 Plus the last 4 digits of your social security or student identification number

(Example, if your social security number is 410-34-7859 then your income would be 23,000 +7859=

$30,859)

Expenses:

Supplies $1,000

Postage $500

Meal and Entertainment expenses $1,200

On July 1, 2016 she bought a new computer for $3,000 – it is used 100% for her business

Other information:

Mortgage Interest paid $14,000 (on their principal residence)

Real Estate tax paid $4000 (on their principal residence)

They paid $3000 to a roofer to replace the roof after a heavy rainfall (on their principal residence)

On April 15, 2016, they paid $500 to the State of Maryland for income tax owed to Maryland when they

filed their 2015 income tax return

Credit card interest paid $200

Charitable donations $1800 cash

Clothing donated to Goodwill $300

They own a rental property, a house at 12 Main Street, Rockville, Maryland.

They rent the house out to a family who paid them $1200 per month in rent for all 12 months of 2016.

The tenants paid all the utilities, the McDonald paid the real estate taxes of $4000.

The McDonalds paid $300 to repair a window that had broken in the house.

The McDonalds bought the house on January 1, 2015 for $200,000. The building represented 75% of the

value and the land is 25% of the value when they purchased the property.

Go to IRS.Gov and print out forms needed: Form 1040, Schedules A,B,C,D,E and SE. You do not need to

complete forms 4562.

Prepare the tax return for the McDonalds for 2016 and answer the following question:

1. How much can Jenny contribute to a SEP plan? How much would the tax liability of the

McDonald’s be lowered if she makes that contribution?