Question

Paul J. and Judy L. Vance are married and file a joint return. Paul is self- employed as a dentist, and Judy is a college professor. Paul and Judy have two children. The oldest is Vince who lives at home. Vince is a law student at the University of Cincinnati and worked part-time during the year, earning $1,500, which he spent for his own support. Paul and Judy provided $6,000 toward Vince’s support. Jennifer is the youngest and lived in the Vance’s home for the entire year. The Vances provide you with the following additional information. The Vances do not want to contribute to the presidential election campaign. The Vances live at 621 Franklin Avenue, Cincinnati, OH 45211. Paul’s birthday is 3/5/1960 and his Social Security number is 333-45-6666. Judy’s birthday is 4/24/1963 and her Social Security number is 566-77-8888. Vince’s birthday is 11/6/1995 and his Social Security number is 576-18-7928. Jennifer’s birthday is 12/12/2008 and her Social Security number is 613-97-8465. The Vances do not have any foreign bank accounts or trusts. Judy is a lecturer at Xavier University in Cincinnati, where she earned $30,000. The university withheld federal income tax of $3,375, $1,860 of Social Security tax and $435 of Medicare tax. She also worked part of the year for Delta Airlines. Delta paid her $10,000 in salary, and withheld federal income tax of $1,125, Social Security tax of $620, and Medicare tax of $145. The Vances received $800 of interest from State Savings Bank on a joint account. They received interest of $1,000 on City of Cincinnati bonds they bought in January with the proceeds of a loan from Third National Bank of Cincinnati. Paul received a dividend of $540 on General Bicycle Corporation stock he owns. Judy received a dividend of $390 on Acme Clothing Corporation stock she owns. Paul and Judy received a dividend of $865 on jointly owned stock in Maple Company. All of the dividends are ordinary dividends. Paul practices under the name "Paul J. Vance, DDS." His business is located at 645 West Avenue, Cincinnati, OH 45211, and his employer identification number is 01-2222222. Paul’s gross receipts during the year were $111,000. Paul uses the cash method of accounting for his business. Paul’s business expenses are as follows: Advertising 1,200 Professional dues 490 Professional journals for dentists 360 Contributions to employee pension plans 2,000 Malpractice insurance 3,200 Fine for overbilling State of Ohio for work performed on welfare patients 5,000 Insurance on office contents 720 Interest on money borrowed to refurbish office 600 Accounting services 2,100 Miscellaneous office expense 388 Office rent 12,000 Dental supplies used in dental services for patients 7,672 Utilities and telephone 3,360 Wages 30,000 Payroll taxes 2,400 In June, Paul decided to refurbish his office. This project was completed and the assets placed in service on July 1 2018. Paul’s expenditures included $8,000 for new office furniture, $6,000 for new dental equipment (seven-year recovery period), and $2,000 for a new computer. Paul elected to compute his cost recovery allowance using MACRS. He did not elect to use §179 immediate expensing and he chose not to claim any bonus depreciation. Judy’s mother, Sarah, died on July 2, 2016, leaving Judy her entire estate. Included in the estate was Sarah’s residence (325 Oak Street, Cincinnati, OH 45211). Sarah’s basis in the residence was $30,000. The fair market value of the residence on July 2, 2017, was $155,000. The property was distributed to Judy on July 2, 2017. The Vances have held the property and have managed it themselves and they started renting the house to the same tenant starting January 1, 2018.To compute depreciation on the house, the Vances had allocated $15,000 of the property’s basis to the land on which the house is located. The Vances collected rent of $1,000 a month during the months the house was rented during the year. They incurred the following related expenses during this period: Property insurance 500 Property taxes 800 Maintenance 465 Depreciation (to be computed by you) The Vances sold 200 shares of Capp Corporation stock on September 3, 2018, for $42 a share. The Vances received the stock from Paul’s father on June 25, 1980, as an inheritance. Paul’s father originally purchased the stock for $10 per share in 1967. The stock was valued at $14.50 per share on the date of inheritance Judy is required by Xavier University to visit several high schools in the Cincinnati area to evaluate Xavier University students who are doing their practice teaching. However, she is not reimbursed for the expenses she incurs in doing this. During the spring semester (January through April 2018), she drove her personal automobile 6,800 miles in fulfilling this obligation. Judy drove an additional 6,700 personal miles during 2018. She has been using the car since June 30, 2011. Judy uses the standard mileage method to calculate her car expenses. Paul and Judy have given you a file containing the following receipts for expenditures during the year: Prescription medicine and drugs (net of insurance reimbursement) $376 Doctor and hospital bills (net of insurance reimbursement) $2,468 Penalty for underpayment of last year’s state income tax $15 Real estate taxes on personal residence $4,762 Interest on home mortgage (paid to Home State Savings & Loan) $8,250 Interest on credit cards (consumer purchases) $595 Cash contribution to St. Matthew’s church $3,080 Payroll deductions for Judy’s contributions to the United Way $150 Fee for preparation of 2017 tax return paid April 12, 2018 of $500. The Vances made timely estimated federal income tax payments of $1,700 each quarter during 2018. The Vances made the fourth-quarter payment on December 31, 2018. They would like to receive a refund for any overpayments.

Answer 1

Election Out of Qualified Economic Stimulus Property

Taxpayer hereby elects under IRC Section 168(k)(2)(D)(iii) out of having Qualified Economic Stimulus property for the following asset classes placed in service during the tax year ending 12/31/2011.

5 year Property

7 year Property

1040 U.S. Individual Income Tax Return201 1 OMB No. 1545-0074 IRS Use Only-Do not write or staple in this spac0. See separate instructions. For the year Jan. 1-Dec.31, 2011, or other tax year beginning Your social security number name and initial Last name Vance 3 3 3 4 5 6 6 6 If a joint retum, spouse's first name and initial Spouse's social security number Last name Vance 5 6 6 7 78 8 8 8 Make sure the SSNis) above and on line Bc are correct. 621 Franklin Avenue Presidential Election Campaign Check here fyou ar your spouse if fling Cincinnati, OH 45211 Foreign pastal code ointy. want $3 to go to this fund.Checking a box below will not change your tax or Foreign country name YouSpouse 4 Filing Status Head of household (with qualifying person). (See instructions) lf 2Maried filing jointly (even if only one had income) Check only one 3Married filing separately. Enter spouse's SSN above the qualifying person is a child but not enter this child's name here. and full name here. 5 | Qualifying widow(er) with dependent child Boxes checked on 6a and 6b 6a Yourself. If someone can claim you as a dependent, do not check box 6a Exemptions No. of children on 6c who: lived with you_ (4) if child under age 1 7 qualitying for child tax credit social security numberrelašonship to you First name Last name live with you due to divoroe 5 7 6 1 8:7 9 28 Son If more than four Jennifer Vance 6 139 7 846 5 Daughter nstructions and check here- Add numbers on lines above 4 d Total number of exemptions claimed 40,000 7 Wages, salaries, tips, etc. Attach Form(s) W-2 Income 8a Taxable interest. Attach Schedule B if required 8a b Tax-exempt interest. Do not include on line 8a 8b Attach Form(s) W-2 here. Also 9a Ordinary dividends. Attach Schedule B if required 9a b Qualified dividends attach Forms 10 Taxable refunds, credits, or offsets of state and local income taxes W-2G and 1099-R if tax 12 Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here13 13 If you did not 14 Other gains or (losses). Attach Form 4797 915 15a IRA distributions bTaxable amount 16a Pensions and annuities 16a b Taxable amount 7 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 18 Farm income or (loss). Attach Schedule F 17 Enclose, but do not attach, any19Unemployment compensation payment. Also, please use 20a Social security benefits 20a 21 Other income. List type and amount 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income22 b Taxable amount 20b 21 92,042 23 Educator expenses 24 Certain business expenses of reservists, performing artists, and fee-basis govenment officials. Attach Form 2106 or 2106-EZ Gross Income 24 25 Health savings account deduction. Attach Form 8889 26 Moving expenses. Attach Form 3903 27 Deductible part of self-employment tax. Attach Schedule SE27 28 Self-employed SEP, SIMPLE, and qualified plans 29 Self-employed health insurance deduction 30 Penalty on early withdrawal of savings 31a Alimony paid b Recipient's SSN 32 IRA deduction 33 Student loan interest deduction 34 Tuition and fees. Attach Form 8917 34 35 Domestic production activities deduction. Attach Form 8903 35 36 Add lines 23 through 35 37 Subtract line 36 from line 22. This is your adjusted gross income 2,974 36 89,068 37

Page 2 orm 1040 (2011) 89,068 38 Amount from line 37 (adjusted gross income) 39a Check You were bom before January 2, 1947, Blind. Tax and Total boxes Spouse was born before January 2, 1947, Blind. checked39a b If your spouse itemizes on a separate return or you were a dual-status alien, check here39b Itemized deductions (from Schedule A) or your standard deduction (see left margin) Credits if: Standard 22,864 40 40 66,204 41 People who 41 Subtract line 40 from line 38 Coen an 42 Exemptions. Multiply $3,700 by the number on line 6d 43 Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -O- 14,800 39a or 39b who can be 51,404 43 5,641 claimed as a44 Tax (see instructions). Check if any from: a Alternative minimum tax (see instructions). Attach Form 6251 Form/s) 8814bFom 497 962 election44 dependent, 45 45 instructions Add lines 44 and 45 All others 4 46 5,641 7 Foreign tax credit. Attach Form 1116 if required Credit for child and dependent care expenses. Attach Form 2441 48 Married filing 48 separately 800 49 Education credits from Form 8863, line 23 Retirement savings contributions credit. Attach Form 8880 50 Chid tax credit (see instructions) Married filing Quaitying 1,000 51 52 Residential energy credits. Attach Form 5695 $11.600 Head of 53 Othercredits from Form: a3800 b 8801 c 1,800 54 Add lines 47 through 53、These are your total credits 55 Subtract line 54 from line 46. If line 54 is more than line 46, enter-0 3,841 5,172 56 Self-employment tax. Attach Schedule SE Other 57 Unreported social security and Medicare tax from Form: a 4137 b 8919 58 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required 59a Household employment taxes from Schedule H 57 Taxes b First-time homebuyer credit repayment. Attach Form 5405 if required 60 Other taxes. Enter code(s) from instructions 9,013 61 Add lines 55 through 60. This is your total tax 4,500 Payments 62 Federal income tax withheld from Forms W-2 and 1099 6,000 2011 estimated tax payments and amount appled from 2010 return Earned income credit (EIC) 3 63 If you have a64a qualifying b Nontaxable combat pay election64b Schedule EIC. 65 Additional child tax credit. Attach Form 8812 66 American opportunity credit from Form 8863, line 14 67 First-time homebuyer credit from Form 5405, line 10 68 Amount paid with request for extension to file 69 Excess social security and tier 1 RRTA tax withheld 70 Credit for federal tax on fuels. Attach Form 4136 สเ Credits from Form: a2439 b 8839c8801d8885 71 Add lines 62, 63, 64a, and 65 through 71. These are your total payments 72 10,500 72 Refund 73 lf line 72 is more than line 61, subtract line 61 from line 72. This is the amount you overpaid 74a Amount of line 73 you want refunded to you. If Form 8888 is attached, check here 73 1,487 1,487 74a l Direct deposib Routing number d Account number 75 Amount of line 73 you want applied to your 2012 estimated tax 76 Amount you owe. Subtract line 72 from line 61. For details on how to pay, see instructions76 75 Amount ou Owe 77Estimated tax penalty (see instructions) Third Party Do you want to allow another person to discuss this return with the IRS (see instructions)?Yes. Complete below. No Personal identification Under penalties of perjury, I declare that I have examined this retum and accompanying schedules and statements, and to the best of my knowledge and belief they are true, correct, and complete. Declaration of preparer (other than taxpaye) is based on all information of which preparer has any knowledge. Here Date Your occupation Daytime phone number ont return? See、 Your signature Keep a copy for Spouse's signature. If a joint returm, both must sign Date Spouse's occupation f the IRS sent you an ldentity Protection PIN, enteri here (see inst.)

Fom 2106-EZ OMB No. 1545-0074 Unreimbursed Employee Business Expenses 2011 Department of the Internal Revenue Service Attach to Form 1040 or Form 1040NR No. 129A in which you i Social security number ncurred Judy L. Vance Lecturer 566 You Can Use This Form Only if All of the Following Apply e You are an employee deducting ordinary and necessary expenses attributable to your job. An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary * You do not get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 are not considered reimbursements for this purpose). . If you are claiming vehicle expense, you are using the standard mileage rate for 2011 Caution: You can use the standard mileage rate for 2011 only if (a) you owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or (b) you leased the vehicle and used the standard mileage rate for the portion of the lease period after 1997 PartI Figure Your Expenses 1 Complete Part I1. Multiply line 8a by 51c (.51) for miles driven before July 1, 2011, and by 55.5c (.555) for miles driven after June 30, 2011. Add the amounts, then enter the result here ..1 3.468 2 Parking fees, tolls, and transportation, including train, bus, etc., that did not involve overnight travel or commuting to and from work....... ..2 3 Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Do not include meals and entertainment . . 3 4 Business expenses not included on lines 1 through 3. Do not include meals and entertainment 4 5 Meals and entertainment expenses: Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred while away from home on business by 80% (80) instead of 50%. For details, see instructions.) | x 50% (.50). (Employees subject to 5 6 Total expenses. Add lines 1 through 5. Enter here and on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, fee-basis state or local government officials, qualified performing artists, and individuals with disabilities: See the instructions for special rules on where to enter this amount.) 6 3,468 Part II Information on Your Vehicle. Complete this part only if you are claiming vehicle expense on line 1 7 When did you place your vehicle in service for business use? (month, day, year)06 /30 I. 2010 8 Of the total number of miles you drove your vehicle during 2011, enter the number of miles you used your vehicle for: a Business 6,800 b Commuting (see instructions) c Other 6,700 9 Was your vehicle available for personal use during off-duty hours? . . . Yes No Yes □ No Do you (or your spouse) have another vehicle available for personal use? . 10 . . . . . . . . . . . 11a Do you have evidence to support your deduction? . . . . . . . . . . . . . . . . . . . 回Yes □No b If "Yes," is the evidence written? E] Yes II No Form 2106-EZ (2011) For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 206040

Depreciation and Amortization OMB No. 1545-0172 rom 4562 2011 (Including Information on Listed Property) Departmant of the Treu Interna Pleven เต Sanoe (99) See separate instructions. Sequence No. 179 Namels) shown on rturn Business or actvity to which this fom relates Paul J. & Judy L. Vance Schedule C Dentist 333-45-6666 Part Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. 1 Maximum amount (see instructions 2 Total cost of section 179 property placed in service (see instructions) 3 Threshold cost of section 179 property before reduction in limitation (see instructions) 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter 0-. If married filing separately, see instructions a) Description of property ) Cost (business use only) c) Electod cost 7 Listed property. Enter the amount from line 29 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 9 Tentative deduction. Enter the smaller of line 5 or line 8 10 Carryover of disallowed deduction from line 13 of your 2010 Form 4562 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions)11 12 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 13 Carryover of disallowed deduction to 2012. Add lines 9 and 10, less line 1213 Special Depreciation Allowance and Other Depreciation (Do not include listed property. (See instructions. 14 Special depreclation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions) 15 Property subject to section 1680(1)election 16 Other depreciation tanit llll AC PartI MACRS Dopreciati liflébkan釙kywns i linan @be3 isait iwank?1Aal pnystly.) ekx1 İnan odikaır.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2011 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here Section B-Assets Placed in Service During 2011 Tax Year Using the General Depreclation System d) Racovery pariod(e) Convention Classication Of property gl Depreciation deduction HY 200 DB 400 7-year property c 14,000 HY 200 DB property 27.5 property Section C-Assets Placed in Service During 2011 Tax Year Using the Alternative Depreciation System 20a Class life 12ars c 40-year 21 22 Total Add amounts from line 12, lines 14 through 17, ines 19 and 20 in column (g). and ine 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations-see instructions 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs 2,400 Fom 4562 (2011) For Paperwork Reduction Act Notice, see separate instructions Cat. No. 1290SN

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