Question

el

Kelly and Chanelle Chambers, ages 47 and 45, are married and live at 584 Thoreau Drive. Boston, MA 59483. Kelly's Social Security number is 111-11-1111 and Chanclle's is 222-22-2222 The Chambers have two children: Emma, age 23, and Chet, age 19. Their Social Security numbers are 333-33-3333 and 444-44-4444, respectively. Emma is a single college student and earmed $8,000 during the summer. Kelly and Chanelle help Emma through school by paying for her room, board, and tuition. Emma lives at home during the summer. Chet has a physical handicap and lives at home. He attends a local university and earned $4,000 working for a marketing firm. In sum, Kelly and Chanelle provide more than 50% of both Emma 's and Chct's total support for the ycar. Kelly is a commercial pilot for a small airline. His salary is $95,000, from which S19,000 of federal income tax and S8,000 of stare income tax were withheld. Kelly also pays premiums for health, disability, and life insurance. $2,000 of the premiumn was for health insurance. $2.50 for disability, and $400 for life insurance. Chanelle c ork consulting. liance Networks, a proprietorship hat does ner During the year, Chanelle's gross revenues were S23,000. She incurred the following ex- penses in her business: S 700 5,400 150 1,200 1,300 800 Liability insurance Software rental Journals and magazines Training seminars Supplies Donations to a political campaign fund Kelly enjoys playing guitar and plays in a band. Kelly's band has developed a local fol- lowing. This year, his gross revenues were $1,200 for playing shows and S700 on CD sales. He incurred the following expenses: Cpars Studio rent expense Sound system repairs $1,300 200 S00 800 CD production New guitar and amplifier Kelly's father passed away during the year. Kelly and Chanelle received $100,000 from the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums Chanelle urchased 100 shares of Thurston Co. stock on May 1, 1991, for $1.000. Thurston Co. was declared bankrupt during the current vear Cher's physician recommended that he see a physsical therapist to help with his disabiE iry. Kelly paid the therapist $7,000 during the year because his insurance would nor cover the bills. Kelx and Chanelle went to Las Vegas and won $5,000 at the blackjack table. The next night, they lost $6,000. Kelly and Chanclle gave 5900 ta ing other income and expenses: their church and, during the year, they had the follow $1,400 500 9,000 Real estare taxes Property taxes on car (determined by value) Home mortgage interest Credit cand financeeharges Tax return preparation fees (S600 is allocable to Chanclle's business) Sales tax on Interest from a savings account Interest from City of Boston Bonds Dividend from 3M stock 09 1,000 6,200 800 700 400 in 2 purchases during the year Prepare Kelly and Chanelle's tax return Form 1040 and Schedules A, B, C, D, and SE for the current year A/B/C/Se/D/8 e7-00

Answer 1

SOLUTION:-

b Deductible meals and entertainment Insurance (other than health)... 15 16 Interest 700 15 (see instructions). 24 b 25 Utilities.... 25 26 Wages (less employment credits) 16 a 26 Mortgage (paid to banks, etc) a b Other 16 b 27a Other expenses (from line 48) b Reserved for future use 27 1,350 17 Legal & professional services... 17 28 Total expenses before expenses for business use of home. Add lines 8 through 27a. 27 b 28 8,750 14,250 29 Tentative profit or (loss). Subtract line 28 from line 7. 30 Expenses for business use of your home. Do not report such expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions) Simplified method filers only: enter the total square footage of: (a) your home 29 Use the Simplified and (b) the part of your home used for business: Method Worksheet in the instructions to fiqure the amount to enter on line 30. 30 Net profit or (loss). Subtract line 30 from line 29 If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. 31 31 14,250 32 If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Form 1040, li ne 12, (or Form 1040NR, li ne 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the instructions for line 31). Estates and trusts, enter on Form 1041, line 3 All investment is at risk 32a Some investment If you checked 32b, you must attach Form 6198. Your loss may be limited 32 b is not at risk

Kelly Chambers f a oint return, spouse's first name and ini tia |143-44-5687 Last reme Spouse's social security number Chanelle Chambers 123-33-3333 Home address (number and street). If you have a P.O. hox, sea instructions Apartment ro Make sure the SSN(s) above and on line 6c are correct 584 Thoreau Dr City, town or post office, state, and ZIP coce. If you have a forcign address, also complcte spacas belaw (scc instructiors) Presidential Election Campaign Check here if you, or your spouse if filing jcinty, want $3 to go to this fund? Chedking a box below will not change your tax or refund Boston, MA 59483 Foreign country name Foreign province/statelcounty Foreign postal code You |Spouse Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's Single X Married filing jointly (even if only one had income) 1 4 Filing Status 2 Married filing separately. Enter spouse's SSN above & full name here Check only one box Qualifying widow (er) with dependent child name here...! 5 Boxes checked on 6a and 6b... No. of children on 6c who: Exemptions 6a Yourself. If someone can claim you as a dependent, do not check box 6a 2 b Spouse.. (4) (2) Depencent's social security number (3) Dependent's relationship to you if chld under age 1 qualTy ng fer child ta cr see instrs) c Dependents: lived 2 with you. did not live with you due to divorce or separation (see instrs), , Dependents on 6c not entered above Last name (1) First name Emma Chambers 123-44-4456 Daughter 135-44-5533 Son If more than four dependents, see instructions and Chet Chambers check here . Add numbers on lines above 4 d Total number of exemptions claimed. . 7 Wages, salaries, tips, etc. Attach Form(s) W-2 8a Taxable interest. Attach Schedule B if required 95,000 800 7 Income 8a 8 b b Tax-exempt interest. Do not include on line 8a 9a Ordinary dividends. Attach Schedule B if required. 700 9a 400 Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax nas mithheld St 2. 9b 400 b Qualified dividends 10 Taxable refunds, credits, 11 Alimony received... 12 Business income or (loss). Attach Schedule C or C-EZ.. 10 or offsets of state and local income taxes 11 13,650. 12

Form T040 (2013) Page 2 Kelly and ChaneIle Chambers 143-44-568 112,843. 38 Amount from line 37 (adjusted gross income) 38 Tax and Credits You were born before January 2, 1949, was born before January 2, 1949, Blind. Total boxes Blind. checked,39 a 39 a Check Spouse if: 39 b Standard Deduction for - separate return or you were a dual-status alien check here b If your spouse itemizes on a 24,800 88,043. 15,600 40 40 41 Itemized deductions (from Schedule A) or your standard deduction (see left margin). 41 Subtract line 40 from line 38 People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions All others: 42 Exemptions. If line 38 is $150,000 or less, multiply $3,900 by the number on line 6d. Otherwise, see instrs 43 Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0-. 42 43 72,443 Form(s) 8814 Form 4972 44 Tax (see instrs). Check if any from: a C 9,911 0. 9,911. b 44 45 Alternative minimum tax (see instructions). Attach Form 6251. 46 Acld lines 44 and 45 47 Foreign tax credit. Attach Form 1116 if required Credit for child and dependent care expenses. Attach Form 2441 49 Education credits from Form 8863, line 19 45 46 Single or Married filing separately $6,100 Married filing jointly or Quality ing widow(er) $12,200 47 48 48 49 50 Retirement savings contributions credit. Attach Form 8880 50 51 Child tax credit. Attach Schedule 8812, if required 52 Residential energy credits. Attach Form 5695. 51 52 Other crs from Form: a 54 Add lines 47 through 53. These 53 3800 b L088 C are your total credits 53 Head of household, $8,950 54 9,911 2,013. 55 Subtract line 54 from line 46. If Iline 54 is more than line 46, enter -0.. 55 56 Self-employment tax. Attach Schedule SE. 57 Unreported soacial security and Medicare tax from Form: a Additional tax on IRAS, other qualified retirement plans, etc. Attach Form 5329 if required 59 a Household employment taxes from Schedule H. b First time homebuyer credit repayment. Attach Form 5405 if required. 56 Other Taxes b 8919 57 4137 58 58 59 a 59b 60 Taxes from: Form 8959 b Form 8960 c 60 Instrs; enter codes) 61 Add lines 55-60. This is your total tax. 61 11,924 19,000 62 Federal income tax with he Id from Forms W-2 and 1099 62 Payments 63 2013 estimated tax payments and amount applied from 2012 return. .. 64 a Eamed income credit (EIC). b Nontaxable combat pay election. 63 If you have a qualifying child, attach 64a 64b Schedule EIC. A - . O010

more, see instructions. You must attach Form 8283 if gift and got a benefit for it. over $500 17 see instructions. 18 Carryover from prior year. 18 Add lines 16 through 18 19 19 900 Casualty and Theft Losses 20 Casualty or theft loss(es). Attach Form 4684. (See instructions.) Unreimbursed employee expenses job education, etc. Attach Form 2106 or 2106-EZ if required. (See instructions.) 20 0. Job Expenses 21 and Certain Miscellaneous Deductions job travel, union dues, 21 22 Tax preparation fees 23 Other expenses 22 400 investment, safe deposit box, etc. List type and amount 23 24 Add lines 21 through 23 24 400 112,843 Enter amount from Form 1040 line 38.. 26 Multiply line 25 by 2 % ( .02) 27 Subtract line 26 from line 24. If line 26 is more than line 24, enter -0 25 25 2,257 26 0. Other Miscellaneous Deductions 28 from list in instructions. List type and amount Other Gambling Losses to Extent of Winnings 5,000 28 5,000 Total Itemized Deductions 29 $150,000 Is Form 1040, line 38, over No. Your deduction is not limited. Add the amounts in the far right column for lines 4 through 28. Also, enter this amount on Form 1040, line 40. Yes. Your deduction may be limited. See the Item ized Deductions Worksheet in the instructions to figure the amount to enter. you elect to itemize deductions even deduction, check here. 24,800 29 It 1 though they are less than your standard 27 30

List name of payer. If any interest is from a seller-financed mortgage and the buyer used the property as a personal residence, see the instructions and list this interest first. Also show that buyer's social security number and address Amount 1 Part I Interest Savings Account 800 (See instructions for Form 1040A, or Form 1040 line 8a.) Note. ycu receive a Forri 1099-INT, Forn 1099-CID, or substtute statermert from a trckerage firm, list the firrms name as the pavar ard enter the total inerest stowr ern that fom 800 2 Add the amounts on line 1.. 2 3 Excludable interest on series EE and U.S. savings bonds issued atfter 1989. Attach Form 8815. 3 4 4 800 Subtract line 3 from line 2. Enter the result here and on Form 1040A or Form 1040, line 8a. Note. If line 4 is over $1,500, you must complete Part II. 5 List name cf payer Amount Part II Minnesota Mining &_Mfg_Co 400 Ordinary Dividends (See instructions for Form 1040A, or Form 1040 line 9a.) 0nst III

(See instructions for Form 1040A, or Form 1040 line 9a.) Note, If youreceived a Fcrm 1099-DIV or substtute statemert from a brckerage firm, list tha firm's name as the paver and enler the ordnary dividends shown on that form. 5 Add the amounts on line 5. Enter the total here and on Form 1040A or Form 1040, line 9a. Note. If line 6 is over $1,500, you must complete Part llI. 400 6 6 You must complete this part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a Yes No grantor of, or a transferor to, a foreign trust Part II Foreign Accounts and Trusts 7 a At any time during 2013, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions.. If 'Yes,' are you required to fi le FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), formerly TD F 90-22.1, to report that financial interest or signature authority? See FinCEN Form 114 and its instructions for filing requirements and exceptions to those requirements. b If you are required to file Fin CEN Form 114, enter the name of the foreign country where the financial X (See instructions. account is located 8 During 2013, did you receive a cistribution from, or were you the grantor of, or transferor to, a foreign trust? if 'Yes, you may have to file Form 3520. See instructions X

Of the total number of mi es you drove your vehicle during 2013, enter the number of miles you used your vehicle for 44 a Business b Commuting (see instructions) c Other OYesNo 45 Was your vehicle available for personal use during off-duty hours?. YesNo 46 Do you (or your spouse) have another vehicle available for personal use? YesNo 47 a Do you have evidence to support your deduction? YesNo b If 'Yes, is the evidence written? Part V Other Expenses List below business expenses not incluced on lines 8-26 or line 30. ues and Subscriptions 150 Training Seminars 1,200 48 1,350 48 Total other expenses. Enter here and on line 27a..

ttt (see instructions) 10 Commissions and fees 9 20 Rent or lease (see instructions): 10 20 a a Vehicles, machinery, and equipment b Other business property 11 (see instructions). 12 Depletion. . Contract labor 20 b 1,300 200 11 21 Repairs and maintenance. 21 12 22 Supplies (not included in Part Ill) 22 13 Depreciation and section 179 expense deduction (not included in Part Ill) (see instructions). 14 Employee benefit programs (other than on line 19 15 Insurance (other than health)... 15 16 Interest: 23 Taxes and licenses. 23 457 24 Travel, meals, and entertainment: 13 24 a a Travel. 14 b Deductible meals and entertainment (see instructions) 25 Utilities 24 b 25 a Mortgage (paid to banks, etc). b Other 17 Legal & professional services... 16 a 26 Wages (less employment credits) 26 -557 16 b 27 a Other expenses (from line 48) 27 a 27 b 17 b Reserved for future use 600 28 Total expenses before expenses for business use of home. Add lines 8 through 27a 28 2,000 -600 29 Tentative profit or (loss). Subtract line 28 from line 7 29 30 Expenses for business use of your home. Do not report such expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions) Simplified method filers only: enter the total square footage of: (a) your home: Use the Simplified and (b) the part of your home used for busi ness: Method Worksheet in the instructions to figure the amount to enter on line 30. 30 31 Net profit (loss). Subtract line 30 from line 29 or If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, li ne 2. If you checked the box on line 1, and trusts, enter on Form 1041, line 3, If a loss, you must go to line 32 see instructions). Estates 31 -600 If you have a loss, check the box that describes your investment in this activity (see instructions) 32 If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the instructions for line 31). Estates and trusts, enter on Form 1041, line 3. All investment is at risk 32 a Some investment is not at risk If you checked 32b, you must attach Form 6198, Your loss may be limited, 32 b

Cost of Goods Sold (see instructions) Part III Other (attach explanation) b 33 Method(s) used to value closing inventory: Cost Lower of cost or market C 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If 'Yes,' attach explanation . No Yes 35 Inventory at beginning of year. If different from last year's closing inventory attach explanation 35 36 Purchases less cost of items withdrawn for personal use 37 Cost of labor. Do not include any amounts paid to yoursel 37 38 Materials and supplies 38 500 Other costs. 39 39 Add lines 35 through 39. 40 500 40 41 Inventory at end of year 41 Cost of qoods sold. Subtract line 41 from line 40. Enter the result here and on line 4 500 42 42 Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562 43 When did you place your vehicle in service for business purposes? (month, day, year) Of the total number of mi es you drove your vehicle during 2013, enter the number of miles you used your vehicle for 44 c Other a Business b Commuting (see instructions) Yes No 45 Was your vehicle available for personal use dluring off-duty hours?... 36

Yes No 46 Do you (or your spouse) have another vehicle available for personal use? YesNo 47 a Do you have evidence to support your deduction?. YesNo b If 'Yes, is the evidence written?. Part V Other Expenses. List below business expenses not incluclecl on lines 8-26 or line 30 Hobby Loss Limitation 557 Total other expenses. Enter here and on line 27a. .. . . -557 48 48

Nama(s) shown cn retrn Your social security number 143-44-5687 Kelly and Chanelle Chambers Short-Term Capital Gains and Losses Assets Held One Year or Less Part See instructions for how to figure the amounts to enter on lines below (h) Gain or (loss) Subtract column (e) from column (d) and combine the result with column (g) Adjustments to gain or loss from Form(s) 8949, Part I, line 2, column (g) (d) Proceeds (sales price) (e) Cost (or other basis) This form may be easier to complete if you round off cents to vwhole dollars. 1a Totals for all short-term transact ons reported on Fom 1099-3 for which basis was reportec to the IRS and for which you have no adjust ments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line Tb..... 1b Totals for all transactions reported on Form(s) 8949 with Box A checked. 2 Totals for all transactions reported on Form(s) 8949 with Box B checked. 3 Totals for all transactions reported on Form(s) 8949 with Box C checked 4 Short-term gain from Form 6252 and short-term gain or (loss) from Forms 4684, 6781, and 8824 5 Net short term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule (s) K-1.. 5 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions.... 7 Net short-term capital gain or (oss). Combine lines a through 6 n column (h). If you have any long-term capital gain or losses, go to Part II below. Otherwise, go to Part IIl on page 2.. 7 |Long-Term Capital Gains and Losses Assets Held More Than One Year Part I

16 Combine lines 7 and 15 and enter the result -1,000 16 If line 16 is a gain, enter the amount from line 16 on Form 1040, line 13, or Form 1040NR, line 14. Then go to line 17 below. If line 16 is a loss, skip lines 17 through 20 below. Then go to line 21. Also be sure to complete line 22 If line 16 is zero, skip lines 17 through 21 below and enter -0- on Form 1040, line 13, or Form 1040NR line 14. Then to go line 22. 17 Are lines 15 and 16 both gains? Yes. Go to line 18 No. Skip lines 18 through 21, and go to line 22. 18 Enter the amount, if any, from line 7 of the 28% Rate Gain Worksheet in the instructions 18 19 Enter the amount, if any, from line 18 of the Unrecaptured Section 1250 Gain Worksheet in 19 the instructions 20 Are lines 18 and 19 both zero or blank? Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, line 42). Do not complete lines 21 and 22 below. No. Complete the Schedule D Tax Worksheet in the instructions. Do not complete lines 21 and 22 below. 21 If line 16 is a loss, e ere and on Form 1040, line 13, or Form 104 R, line 14, the smaller of: The loss on line 16 or -1,000 ($3,000), or if married filing separately, $1,500) Note. When figuring which amount is smaller, treat both amounts as positive numbers 21

Section A- Short Schedule SE. Caution. Reac above to see if you can use Short Schedule SE. 1 a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, cocle A 1 a b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code Z. 1 b Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 Form 1065), box 14, code 2 A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1. Ministers and members of religious orcers, see instructions for tvpes of income to report on this line. See instructions for other income to report 2 14,250 Combine lines la, 1b, and 2 3 3 14,250 4 Multiply line 3 by 92.35% (.9235). If less than $400, you do not owe self-employment tax; do not file this schedule unless you have an amount on line 1b.... 13,160 4. Note. If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. 5 Self-employment tax. If the amount on line 4 is: $113,700 or less, multiply line 4 by 15.3% (.153). Enter the result here and on Form 1040, line 56 or Fomm 1040NR, line 54 More than $113,700, multiply line 4 by 2.9% (.029). Then, add $14,098.80 to the result. Enter the total here and on Form 1040, line 56, or Form 1040NR, line 54 2,013 6 Deduction for one-half of self-employment tax. Multiply line 5 by 50% (50). Enter the result here and on Form 1040, line 27 or Form 1040NR, li ne 27 6 1,007 to

Wage Schedule Federal W/H Medi- State Local W/H Taxpayer Employer Wages FICA W/H care 8,000 8,000 Small Airline 95,000 95,000 19,000. 5,890. 1,378 5,890 1,378 19,000 Grand Total Statement 2 Form 1040, Line 9b Qualified Dividends Minnesota Mining & Mfg Co 400 400 Total $ Statement 3 Schedule A, Line 10 Home Mortgage Interest Reported on Form 1098 9,000 9,000 Total Statement 4 Schedule A, Line 16 Contributions by Cash or Check Church 900 900 Total

attach Form W-2G and 1099-R if tax mas mithheld. 10 Taxable refunds, credits, or offsets of state and local income taxes 11 Alimony received.... 12 Business income or (loss). Attach Schedule C or C-EZ. 10 11 13,650 -1,000. 12 If you did not get a W-2 see instructions. 13 13 Capital gain or (loss). Att Sch D if regd. If not regd, ck here 14 Other gains or (losses). Attach Form 4797 15a IRA distributions..... 16a Pensions and annuities... 17 Rental real estate, royalties, partnerships. S corporations, trusts, etc. Attach Schedule E 18 Farm income or (loss). Attach Schedule F. 19 Unemployment compensation 20a Social security benefits.. 21 0ther income Gambling Winnings 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income. 23 EduCator expenses... p Ti 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ.... 25 Health savings account deduction. Attach Form 8889 26 Moving expenses. Attach Form 3903. 27 Deductible part of self-employment tax. Attach Schedule SE 28 Se-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... 14 b Taxable amount b Taxable amount.. 15b 15a 16a 16 b 17 18 19 20 al b Taxable amount 20 b 5,000. 113,850. 21 22 23 Adjusted Gross Income 24 25 26 27 1,007. 28 29 30 31 a 32 33 Student loan interest deduction. 34 Tuition and fees. Attach Form 8917. 35 Domestic production activities deduction. Attach Form $903. 33 34 35 1,007 112,843. 36 Add lines 23 through 35, 37 Subtract line 36 from line 22. This is your adjusted gross income.. 36 . 37 .

IF YOU HAVE ANY DOUBT PLEASE COMMENT IT. DO YOU LIKE I MY WORK PLEASE THUMBS UP DO NOT GIVE AN DIRECTLY THUMBS DOWN. I HERE TO HELP YOU.

### THANKS YOU ###