Tax returns
Instructions:

Please complete the 2014 federal income tax return for Jesse and Kennedy Reagan. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.

Jesse (age 43) and Kennedy Reagan (age 43) are married and live in Lexington, Kentucky. The Reagans have twin children Katelyn, age 15, and Bruce, age 15. The Reagans would like to file a joint tax return for the year.

The following information relates to the Reagans’ tax year:

• Jesse’s Social Security number is 789-54-1234
• Kennedy’s Social Security number is 944-73-4321

• Katelyn’s Social Security number is 421-23-5960
• Bruce’s Social Security number is 421-23-6904
• The Reagans’ mailing address is 95 Hickory Road, Lexington, Kentucky 40502.
• Katelyn and Bruce are tax dependents for federal tax purposes

Kennedy is a photographer. For the first two months of the year, she was employed by Jensen Photography. However, she resigned her position with Jensen Photography to start her own company called Wild Horse Photography (WHP). WHP is conducted as a sole proprietorship with Kennedy being the sole owner. WHP started business on January 1, 2014 and is located at 1515 West Industrial Road Lexington, Kentucky 40502 (EIN 20-1213147).
Jesse Reagan’s Forms W-2 provided the following wages and withholding for the year:

Employer Gross Wages Federal Income Tax State Income Tax
Withholding Withholding
National Storage $66,200 $8,000 $3,750
Lexington Little League $2,710 0 0

Kennedy Reagan’s Form W-2 provided the following wages and withholding for the year:

Employer Gross Wages Federal Income Tax State Income Tax
Withholding Withholding
Jensen Photography $24,500 $2,450 $1,225
All applicable and appropriate payroll taxes were withheld by the Reagans’ respective employers. All of the Reagan family was covered by minimum essential health insurance during each month in 2014. The insurance was provided by Jesse’s primary employer, National Storage.

The Reagans also received the following during the year:

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$2,500 $12,000 $10,000 $24,500
Jesse and Kennedy Reagan | Tax Return #2

Interest income from First Kentucky Bank $130
Interest income from City of Lexington, KY Bond $450
Interest income from U.S. Treasury Bond $675
Interest income from Nevada State School Board Bond $150
Workers’ compensation payments to Jesse $4,350
Disability payments received by Jesse on account of injury $3,500

• National Storage paid 100% of the premiums on the policy and included the premium payments in Jesse’s taxable wages

Kennedy received the following payments as a result of a lawsuit she filed for damages

sustained in a car accident:

• Medical Expenses for physical injuries

• Emotional Distress (from having been physically injured) • Punitive Damages
Total

Eight years ago, Kennedy purchased an annuity contract for $88,000. She received her first annuity payment on January 1, 2014. The annuity will pay Kennedy $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Kennedy on Form 1099-R for the current year (box 7 contained an entry of “7” on the form).

The Reagans did not own, control or manage any foreign bank accounts nor were they a Grantor or beneficiary of a foreign trust during the tax year.

The Reagans paid or incurred the following expenses during the year:
Dentist/Orthodontist (unreimbursed by insurance) $ 10,500
Doctor fees (unreimbursed by insurance) $ 625
Prescriptions (unreimbursed by insurance) $ 380
KY state tax payment made on 4/15/14 for 2013 tax return liability $ 1,350
Real property taxes on residence $ 1,800
Vehicle registration fee based upon age of vehicle $ 250
Mortgage interest on principal residence $ 8,560
Interest paid on borrowed money to purchase the City of
Lexington, KY municipal bonds $ 400
Interest paid on borrowed money to purchase
U.S. Treasury bonds $ 240
Contribution to the Red Cross $ 1,000
Contribution to Senator Rick Hartley’s Re-election Campaign $ 2,500
Contribution to First Baptist Church of Kentucky $ 6,000
Fee paid to Jones & Company, CPAs for tax preparation $ 200

In addition, Jesse drove 6,750 miles commuting to work and Kennedy drove 870 miles commuting to work at Jensen Photography and 5,230 miles commuting from her WHP office to various off-site photo shoots. The Reagans have represented to you that they maintained careful logs to support their respective mileage.
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Jesse and Kennedy Reagan | Tax Return #2
The Reagans drove 465 miles in total to receive medical treatment at a hospital in April.

The Reagans’ personal residence was burglarized on October 1. The theft occurred during the day while both the Reagans were at work and their children were at school. The Reagans had the following personal-use property stolen:

Item Purchase Date Fair Value on Tax Basis of Item Insurance
Date of Theft Reimbursement
Received
Laptop computer 09/01/2014 3,000 3,000 500
and Printer
Rifle 03/01/2012 2,000 2,500 500
TV/Projector 03/01/2012 5,000 13,000 1,000
2007 Honda Pilot 07/01/2013 4,000 6,500 500
Total 14,000 25,000 2,500
Kennedy reported the following information for WHP’s business activities (WHP uses the cash method of accounting):

Revenues:
Credit card receipts $352,000
Cash receipts 648,000
Total revenue $1,000,000
Expenses:
Advertising $5,450
Insurance-professional 15,750
Office building rent 62,000
Equipment leases 6,050
Travel 14,200
Meals and entertainment 2,975
Wages 498,725
Taxes and licenses 44,875
Employee health insurance 42,000
Employee benefit programs 14,500
Utilities 37,425
Supplies 18,900
Legal and professional fees 15,550
Repairs and maintenance 10,000
Total Expenses $ 788,400

WHP purchased and placed in service the following fixed assets:

Item Date Purchased Amount
Laptop computers March 1 $20,500
Printers June 1 $6,500
Office furniture October 10 $19,000

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Jesse and Kennedy Reagan | Tax Return #2

WHP does not want to claim any bonus depreciation or Section 179 expensing on any of these assets.

Kennedy worked part-time on WHP business activities until she finished his employment with WTE early in the year. Kennedy worked full-time on WHP business activities for the rest of the year.

WHP filed Forms 1099 for payments made to contractors when required to do so.
The Reagans want to contribute to the Presidential Election Campaign. The Reagans would like to receive a refund (if any) of any tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.

Required:

Complete the 2014 tax return for the taxpayer above on blank forms downloaded from the Internal Revenue Service website, irs.gov in your own handwriting preferably in pencil to facilitate changes while you are working on the return if necessary. You are free to use Microsoft Excel however, you are prohibited from using any tax preparation software to complete your return. It is important to learn how numbers flow from page to page of the return.

In addition, please submit a list (typewritten in Microsoft Word is preferred) of all numeric entries that are carried from one page (or form) to another including the dollar amount of the item, the line number and form the numeric item is coming from and the line number and form the numeric item is being carried to. For example:

Item Description Carried from Carried to Amount
Adjusted Gross Income 1040 Line 37 1040 Line 38 $X,XXX

Tax returns

Problems: Chapter 4-58 (Daniel and Freida Butler) South-Western Federal Taxation Comprehensive Volume (2016). Prepare the Tax Return for 2015.
Due: See Syllabus
Changes to Problem: Change all years to one year later (for example, 2014 becomes 2015).
The following information should be helpful in your preparation of the tax return.
(1) (a) Requirement: Prepare the federal income tax return on the appropriate IRS forms. (Even if you use a software program, you must turn in manual entries on IRS forms.) Copies of those forms and instructions are available at www.irs.gov.
(b) Additional Requirements: Prepare a brief top sheet summarizing the factual information in the format of the tax formula.
(2) Strategy: You might want to start with page 1 of the 1040 and manually make entries (pencil recommended). You may then need to do subsidiary forms (e.g., Schedules A & B). You might also want to work out the figures for the tax formula roughly first before beginning the return.
(3) Check Figures:
Adjusted gross income 173,182 Itemized 15,200
Taxable income 142,182
(4) Grading:
(a) Per the syllabus, this manual return is 10 points extra credit.
(b) Forms required: 1040 pages 1 and 2, Schedules A, B, and E p. 2, worksheet line 44.
(5) Additional Helpful Information:
(a) Please use the sequence numbers in the upper right-hand corner of the official IRS forms for the proper order.
(b) Do not calculate next year’s estimates or any late filing penalty or interest.

(6) Notes:(a) Dividends are both qualified and ordinary.(b) OID is $382 and

Tax returns

Problems: Chapter 4-58 (Daniel and Freida Butler) South-Western Federal Taxation Comprehensive Volume (2016). Prepare the Tax Return for 2015.
Due: See Syllabus
Changes to Problem: Change all years to one year later (for example, 2014 becomes 2015).
The following information should be helpful in your preparation of the tax return.
(1) (a) Requirement: Prepare the federal income tax return on the appropriate IRS forms. (Even if you use a software program, you must turn in manual entries on IRS forms.) Copies of those forms and instructions are available at www.irs.gov.
(b) Additional Requirements: Prepare a brief top sheet summarizing the factual information in the format of the tax formula.
(2) Strategy: You might want to start with page 1 of the 1040 and manually make entries (pencil recommended). You may then need to do subsidiary forms (e.g., Schedules A & B). You might also want to work out the figures for the tax formula roughly first before beginning the return.
(3) Check Figures:
Adjusted gross income 173,182 Itemized 15,200
Taxable income 142,182
(4) Grading:
(a) Per the syllabus, this manual return is 10 points extra credit.
(b) Forms required: 1040 pages 1 and 2, Schedules A, B, and E p. 2, worksheet line 44.
(5) Additional Helpful Information:
(a) Please use the sequence numbers in the upper right-hand corner of the official IRS forms for the proper order.
(b) Do not calculate next year’s estimates or any late filing penalty or interest.

(6) Notes:(a) Dividends are both qualified and ordinary.(b) OID is $382 and