Objective
The
objective is to complete, in four successive parts, a comprehensive federal tax
problem of moderate difficulty.
Guidelines
The
Tax Project requires you to complete Appendix E, Problem 1, in four parts. Each
part will have you complete selected paragraphs from the problem.You
must select the appropriate tax forms in doc sharing to complete project.
Part I is worth a possible 25 points.Part II is worth a possible 25 points.Part III is worth a possible 25 points.Part IV is worth a possible 75 points.
The
entire Tax Project is worth a total of 150 points.
Part I is due at the end of Week 3.Part II, which includes work you did during Part I, is
due at the end of Week 5 and includes additional items of Appendix E,
Problem 1.Part III, which includes the work you did during Parts
I and II, is due at the end of Week 6 and includes additional items of
Appendix E, Problem 1.Part IV includes all previously completed items and
completes the problem in its entirety. Part IV is due at the end of Week
7.
After
you have downloaded the Tax Forms from Doc Sharing during Week 2 of the course,
you are encouraged to immediately begin completing the Part I (Week 3)
assignment.
Please
read the entirety of Appendix E, Problem 1 before beginning to complete
the assignment. It has several paragraphs of instructions.
All
DeVry University policies are in effect, including the plagiarism policy.
Any
questions about this paper may be discussed in the weekly Q & A threaded
discussion topic.
Please
see the Syllabus for the late assignment policies.
Part
I DUE 9/23
For
the Part I (Week 3) assignment, you are asked to use the introductory
sentence about the tax payer and complete paragraph items: 1, 12, 16, and 17.
Do notdo additional work from any other paragraph.
Determine
the forms to be completed. Once completed, save your form(s) as Your Last Name
– formname (e.g., Smith-f2106.pdf). Submit your assignment to the Week 3
Assignments Dropbox.
Note:
Optional Tax Software: Please note that DeVry does not provide Tax software to
complete the project. Using software to complete the project is optional and
note required. The forms are provided in doc sharing for your use. However,
students that desire to use the software to complete the project have the
following options:
H
& R Block At Home: The software is included with the purchase of the
hard copy of the textbook. You may use the software disk provided
and follow the installation instructions. You may review the student
companion website or contact the publisher’s customer service to obtain
information regarding the purchase of the H&R Block At Home software
online. If purchased and used to complete your project assignment, you
will need to submit the file created by the software.
Save your work as an H&R Block At Home file.Do NOT save the problem as a PDF file.
TurboTax:
If you purchased TurboTax and completed your assignment as a TurboTax file, you
will need to submit your assignment as a PDF file before submitting it to your
instructor.
Part
II DUE10/7
For
the Part II (Week 5) assignment, you are asked to do the following:
Use the Part I assignment you completed previously.Correct your Part I assignment mistakes, if any, based
on the solution you were provided by your instructor at the end of Week 4.Complete the following additional paragraph items:
2, 3, 13, and 14. .
Save
your file as Your Last Name – formname (e.g., Smith-f2106.pdf), and submit it
to your instructor via the Week 5 Assignments Dropbox.
Part
III DUE 10/14
For
the Part III (Week 6) assignment, you are asked to do the following:
Use the Parts I and II assignments you completed
previously.Correct your Part II assignment mistakes, if any, based
on the solution you were provided by your instructor at the end of Week 5.Complete the following additional paragraph items: 4,
5, 6, and 7.
Save
your file as Your Last Name â formname (e.g., Smith-f2106.pdf), and submit it
to your instructor via the Week 6 Assignments Dropbox.
Part
IV DUE 10/21
For
the Part IV (Week 7) assignment, you are asked to do the following:
Use the Parts I, II, and III assignments you completed
previously.Correct your Part III assignment mistakes, if any,
based on the solution you were provided by your instructor at the end of
Week 6.Complete the following additional paragraph
items: 8, 9, 10, 11, and 15 .
Save
your file as Your Last Name – formname.pdf (e.g., Smith-f2106.pdf), and submit
it to your instructor via the Week 7 Assignments Dropbox.
Grading
Paper Writing Service – Topic Examples – Rubrics
The
following displays the grading rubric for all four parts of your course
project.
Category
Points
%
Description
Documentation & Formatting
15
10
A quality paper will include all
of the required tax forms.
Organization & Cohesiveness
15
10
The content will be properly
entered into the appropriate section and tax form.
Editing
15
10
A quality paper will be free of
any spelling, punctuation, or grammatical errors. Sentences and paragraphs
will be clear, concise, and factually correct.
Content
105
70
A quality tax return will have the
correct dollar values entered into the correct line items of the tax return.
Total
150
100
A quality paper will meet or
exceed all of the above requirements.
Best Practices
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The
following are the best practices in preparing this course project:
Indicate that you prepared the return at the bottom of
page 2 of the Form 1040. Disregard the fact that the instructions say
taxpayer prepared Their own tax return.Using the supplied correct tax returns at the end of
Week 4, correct your tax return as necessary and submit your Part II tax
return by the end of Week 5.Using the supplied correct tax returns at the end of
Week 5, correct your tax return as necessary and submit your Part III tax
return by the end of Week 6.Using the supplied correct tax returns at the end of
Week 6, correct your tax return as necessary and submit your Part IV tax
return by the end of Week 7.
Additional
hints on preparing the best possible project:
Apply a three step process of writing: plan, write, and
complete.Prepare an outline of your research paper before
you go forward.Complete a first draft, and then go back to edit,
evaluate, and make any changes required.
Question from Appenix E:
Appendix E:Comprehensive
Tax Return Problems
PROBLEM 1
Karl F. and Jeanne S. Wheat
are married and live at 13071 Forestview Drive, Columbia, MO 65201. Karl is a
self-employed insurance claims adjuster (business activity code 524290), and
Jeanne is a dietitian for the local school district.
·
1. Karl represents several national casualty
insurance companies on a contract basis. He is paid a retainer and receives
additional compensation if the claims for the year exceed a specified number.
As an independent contractor, he is responsible for whatever expenses he incurs.
Karl works out of an office near his home. The office is located at 1202
Brentwood Avenue. He shares Suite 326 with a financial consultant, and
operating expenses are divided equally between them. The suite has a common
waiting room with a receptionist furnished and paid by the landlord. Karlâs
one-half share of the 2011 expenses he paid is listed below.
Office
rent
$11,600
Utilities
(includes telephone and fax)
4,300
Replacement
of waiting room furniture on April 22
3,600
Rentersâ
insurance (covers personal liability, casualty, and theft)
1,400
Office
expense (supplies and postage meter)
740
New
Toshiba copier (less trade-in on old machine) on February 7
300
Waiting
room coffee service (catered)
280
Waiting
room magazine subscriptions
90
·
For his own business use, Karl purchased a laptop computer for
$2,100 on June 17 and a Nikon camera for $1,200 on February 5. Except for his
vehicle (see item 2), Karl uses the § 179 write-offoption whenever possible.
·
2. On January 2, 2011, Karl paid $31,000 (including
sales tax) to purchase a gently used Dodge Durango SUV that he uses 92% of the
time for business. No trade-in was involved, and he did not claim any § 179
expensing. Karl uses the actual operating cost method to compute his tax
deduction, using the 200% declining-balance MACRS depreciation method with a
half-year convention. His expenses relating to the Durango for 2011 are as
follows:
Gasoline
$3,100
Auto
insurance
1,500
Interest
on car loan
820
Auto
club dues
225
Oil
changes and lubrication
140
License
and registration
90
In connection with his business use of the Durango, Karl paid $510
for parking and $350 in fines for traffic violations. In 2011, Karl drove the
Durango 14,352 miles for business [8,612 miles between January 1 and June 30
and 5,740 miles between July 1 and December 31] and 1,248 miles for personal
use (which includes his daily round-trip commute to work).
·
3. Karl handles most claim applications locally,
but on occasion, he must travel out of town. Expenses in connection with these
business trips during 2011 were $930 for lodging and $1,140 for meals. He also
paid $610 for business dinners with several visiting executives of insurance
companies with whom he does business. Karlâs other business-related expenses
for 2011 are listed below.
·
Contribution
to H.R. 10 (Keogh) retirement plan
$8,000
Premiums
on medical insurance covering family (spouse and children)
4,600
Premiums
on disability insurance policy
(pays
for loss of income in the event Karl is disabled and cannot work)
2,400
State
and local occupation fee
450
Birthday
gift for receptionist
($25
box of Godiva chocolates plus $3 for gift wrap)
28
·
4. Jeanne earns $32,000 as a registered dietician
for the Columbia School District. The job she holds, manager of the school
lunch program, is not classified as full time. Consequently, she is not
eligible to participate in the teacher retirement or health insurance programs.
Jeanneâs expenses for 2011 are summarized as follows:
·
Contribution
to traditional IRA
$4,000
Job
hunting expense
720
Continuing
education program
350
Membership
dues to the National Association of Dietitians
120
Subscription
to Nutrition Today
90
To work full-time and earn a larger salary, Jeanne applied for a
position as chief dietitian for a chain of nursing homes. According to the
director of the recruiting service Jeanne hired, the position has not yet been
filled and Jeanne is one of the leading candidates. The continuing education
program was sponsored by the National Association of Dietitians and consisted
of a one-day seminar on special diets for seniors. Out of a total of 8,670
miles driven for the year, Jeanne drove the family Chevrolet Malibu 930 miles
on job-related use. She drove 410 miles between January 1 and June 30 and the
remaining 520 miles between July 1 and December 31. The Wheats purchased the
car on July 11, 2009, for $23,400. Jeanne uses the automatic mileage method for
computing any available deduction for business use of the car.
·
5. The Wheats have supported Gene Isaacson,
Jeanneâs widowed father, for several years, appropriately claiming him as a
dependent for tax purposes. On December 27, 2010, Gene suffered a massive stroke.
The doctors did everything they could for Gene, but he died in the intensive
care unit of St. Maryâs Memorial Hospital on January 8, 2011. The Wheats paid
the following expenses on behalf of Gene: $11,800 medical ($6,000 incurred in
2010 and $5,800 in 2011) and $5,300 funeral. [The Wheatsâ medical insurance
(see item 3) does not cover parents.] These expenses were paid in January and
February 2011. Geneâs will named Jeanne as executor and sole heir of the
estate.
·
6. Upon the advice of the financial consultant
who shares office space with Karl, the Wheats decided to convert Geneâs home
into a furnished rental house. After several minor repairs (e.g., touching up
the paint on the interior walls, replacing various window screens, and
pressure-washing the brick exterior), the property was advertised for rent in
the classified section of the local newspaper on March 1, 2011. The repairs
cost $720, and the newspaper ad was $360. Based on reconstructed records and
appraisal estimates, information about the property is as follows:
Original
Cost
FMV
1/8/11
House
$40,000
$220,000
Land
10,000
50,000
Furniture
and appliances
21,000
14,000
·
7. Geneâs former residence was rented almost
immediately, with occupancy commencing April 1, 2011, under the following terms:
one-year lease; $2,400 per month; first and last monthâs rent in advance;
$2,000 damage deposit; and lawn care, but not utilities, included. The tenant
complied with all terms except that the December rent payment was not made
until January 1, 2012âthe tenant took an extended Christmas holiday trip.
Expenses in connection with the property were as follows: property taxes,
$2,600; repairs, $320; lawn maintenance, $540; insurance, $1,800; and street
paving assessment, $2,100. The property is located at 12120 Barrington Avenue,
Columbia, MO 65201. (Note: If you are using H&R Block
At Home, input 365in the âdays ownedâ box and in the âdays rentedâ
box. Otherwise, the program will apportion the expenses inappropriately).
·
8. In early December 2010, a friend advised Karl
to buy stock in Pioneer Aviation Inc. (PAI). At that time, PAI was in serious
financial straits and was headed toward bankruptcy. Nevertheless, according to
Karlâs friend, the value of the corporationâs underlying assets was such that
the shareholders were bound to recover considerably more than the current
market price of $0.50 per share. Excited at the chance for a âsureâ profit, on
December 15, 2010, Karl purchased 20,000 shares for $10,000. In September 2011,
the trustee in bankruptcy announced that the stock was worthless and that even
some of PAIâs preferred creditors would not be paid.
·
9. On June 14, 2011, the Wheats sold 500 shares
of Garnet Corporation for $17,500 ($35 per share). They owned 1,000 shares
acquired as follows: 500 shares on November 5, 2007, for $25 a share and 500
shares on August 5, 2009, for $30 a share. The Wheats did not instruct their
broker as to which 500 shares to sell.
·
10. One month before she died on April 14, 2002,
Violet Isaacson (Jeanneâs mother) gave Jeanne a coin collection. Based on
careful records that Violet kept, the collection had a cost basis of $9,000 and
a fair market value of $18,000 at the time Violet passed away. On February 12,
2011, the Wheat residence was burglarized, and the coin collection was stolen.
The Wheats filed a claim for $24,000 (the current value of the collection) with
the carrier of their homeownerâs insurance policy. All they were able to
collect, however, was $10,000, which was the maximum amount allowed for
valuables (e.g., jewelry and antiques) without a special rider.
·
11. In her will, Violet Isaacson (see item 10)
left Jeanne a vacant lot on Joplin Road. Violet had paid $15,000 for the
property, and it had a value of $19,000 when she died. Violet had purchased the
lot because it was adjacent to a school that she expected would expand. By
2011, it has become clear that the Joplin Road area of Columbia is not growing
and that no school expansion will take place. Consequently, on July 1, 2011,
Jeanne sold the lot for $19,000. Not included in this price are back property
taxes (and interest on the underpaid taxes) of $700 on the lot, which the
purchaser assumed and later paid.
·
12. Every year around Christmas, Karl receives
cards from various car repair facilities (including dealerships), expressing
thanks for the business referrals and enclosing cash. Karl has no arrangement,
contractual or otherwise, that requires any compensation for the referrals he
makes. Concerned about the legality of such âgifts,â Karl had previously
consulted an attorney about the matter. Without passing judgment on the status
of the payors, the attorney found that Karlâs acceptance of the payments does
not violate state or local law. Karl sincerely believes that the payments he
receives have no effect on the referrals he makes. During December 2011, Karl
received cards containing $7,200. One card containing $900, however, was
delayed in the mail and was not received by Karl until January 4, 2012.
·
13. In addition to those previously noted, the
Wheatsâ receipts during 2011 are summarized below.
·
Payments
to Karl for services rendered (as reported on Forms 1099 issued by several
payor insurance companies) pursuant to contractual arrangement
$82,000
Income
tax refunds for tax year 2010
Federal
210
State
90
Interest
income
State
of Missouri general-purpose bonds
1,400
GE
corporate bonds
1,100
Certificate
of deposit at Columbia National Bank
900
Qualified
dividends (Duke Energy)
$ 600
Proceeds
from garage sale (see item 14)
9,200
Cash
gifts from Karlâs parents
24,000
Karlâs
net state lottery gains (winnings, $1,000; losses, $900)
100
·
14. On June 2 and 3, 2011, the Wheats held a
garage sale to dispose of unwanted furniture, appliances, books, bicycles,
clothes, and a boat (including trailer). The estimated basis of the items sold
is $25,500. All were personal use property.
·
15. Expenditures during 2011, not mentioned
elsewhere, are as follows:
Medicalâ
Copayment
portion of medical expenses
$1,300
Dental
(orthodontist)
1,200
Taxesâ
State
income tax (see item 17)
3,456
State
sales taxes
1,120
Property
taxes on personal residence
3,800
Interest
on home mortgage reported on Form 1098
4,200
Charitable
contributions
3,600
·
The Wheatsâ medical insurance does not cover dental services. The
Wheats pledge contributions of $1,200 per year to their church. In 2011, they
paid the pledges for 2010â2012. During 2011, the Wheats drove the Malibu 270
miles for medical purposesâ150 miles in the first half of the year and 120
miles in the second half (e.g., trips to the hospital and doctor and dentist
offices)âand 320 miles for charitable purposesâ140 miles in the first half of
the year and 180 miles in the second half (delivering meals to the poor under a
church-sponsored program).
·
16. The Wheats have two sons who live with them:
Trace and Trevor. Both are full-time students. Trace is an accomplished singer
and made $4,200 during the year performing at special events (e.g., weddings,
anniversaries, and civic functions). Trace deposits his earnings in a savings
account intended to help cover future college expenses.
·
17. The Form Wâ2 Jeanne receives from her employer
reflects wages of $32,000. Appropriate amounts for Social Security and Medicare
taxes were deducted. Income tax with-holdings were $1,320 for Federal and
$1,056 for state. The Wheats made quarterly tax payments of $2,200 for Federal
and $600 for state on each of the following dates: April 15, 2011; June 15,
2011; September 15, 2011; and January 15, 2012. Relevant Social Security
numbers are provided below.
Name
Social Security Number
Birth Date
Karl F. Wheat
111â11â1111
06/06/1969
Jeanne S. Wheat
123â45â6781
08/14/1970
Gene Isaacson
123â45â6784
03/12/1934
Trace Wheat
123â45â6788
09/13/1993
Trevor Wheat
123â45â6789
07/20/1991
