1
\nIndividual Income Taxation
\nProf. E. Gary
\nClass Project
\nDue December 05, 2019
\nAlice J. and Bruce M. Jones are married taxpayers who file a joint return. Alice\u2019s
\nbirthday is September 21, 1961, and Bruce\u2019s is June 27, 1960. Bruce is the office
\nmanager for Ames Dental Clinic. Alice is the CPA at Lehman, York & Hunter CPA, LP.
\nThe Jones provide over half of the support of their two children, Cynthia (born
\nJanuary 25, 1994, Social Security number (017-44-9126) and John (born February 7,
\n1995, Social Security number (017-27-4148), who live with them. Both children are fulltime students and live with the Jones except when they are away at college. Cynthia is in
\nher third year of college, and earned $11,350 from a summer internship in 2018, and John
\nis in his first year of college and he earned $3,200 from a part-time job in 2018. In 2018,
\nthe Jones\u2019 paid $4,100 for Cynthia\u2019s college tuition and $3,600 for John\u2019s college tuition.
\nThe Jones also provided all the support for their 26-year-old son Ryan who recently
\ngraduated from law school but cannot find employment. Ryan lives in DC.
\nAccording to Mr. Jones on July 01, 2018, he and his wife exchanged their twofamily house in Westchester County (400 Pinebrook Blvd, New Rochelle, NY), which
\nthey rented entirely from January 01, 2010 to July 01, 2018, for a four family rental
\nproperty located at 685 Atlantic Avenue, Brooklyn, NY. At the time of the exchange, the
\nFMV of the two-family house was $1,200,000, and the adjusted basis was $???????
\n(Calculate based on information provided below). The six-family house had an adjusted
\nbasis of $780,000 and a FMV of $1050,000. The two-family home was subject to a
\n$150,000 mortgage, which the buyer assumed.
\nThe Jones also owned and rented a two-unit commercial retail building located at
\n1560 Avenue A, New York NY, which they purchased on December 01, 2017 and placed
\nin service on January 01, 2018. Information for all three of the rental properties is listed
\nbelow.
\nIn March 2018, Bruce decided to start his own business; a retail bicycle shop to be
\nlocated in NYC near Central Park called \u201cBruce\u2019s Bikes.\u201d On April 20, 2018, Bruce
\nsigned a 10-year lease at a monthly rental rate of $10,000, effective May 01, 2017, for
\nretail space on 110th Street and CPW. The lease provided that Bruce was responsible for
\nthe costs of improving the retail space for its intended use. The terms of the lease also
\nprovided that the first three months were rent-free so that Bruce could complete the
\nconstruction needed to operate a retail bike shop. When Bruce executed the lease he paid
\nthe landlord $50,000 as a security deposit. On May 01, 2018, Bruce paid a contractor
\n$250,000 to provide all construction work relating to the build-out, which included
\nelectrical, plumbing, and carpentry. On June 01, 2018, Bruce purchased the following
\nassets for the business:
\n2
\nEquipment $ 60,000
\nFurniture & Fixtures $ 25,000
\nComputer Equipment $ 16,750
\nAlthough Bruce planned on a grand opening on July 01, 2018, the construction
\nwas not completed until July 21, 2018, causing Bruce to delay the grand opening until
\nAugust 01, 2018.
\nOn August 01, 2018, Bruce purchased a new truck for $32,000, which weighs
\n12,850 pounds, to be used 100% in the business for pickups and deliveries.
\nBruce planned to finance the new business with the $125,000 inheritance he
\nreceived on 03\/01\/2018, from his late father\u2019s estate. Bruce also planned to use $75,000
\nof savings he had invested with Madoff Investment Securities (MIS) but learned on
\n3\/29\/2018, that his entire savings was lost as a result of a massive ponzi scheme, which
\nwas not covered by any insurance. In order to come up with the additional funds needed
\nto finance the construction, equipment, and inventory, Bruce\u2019s grandfather loaned him
\n$110,000 on 05\/15\/20178. On December 25, 2018, Bruce received a letter from his
\ngrandfather stating that he forgives the entire $110,000 loan effectively immediately.
\nFor 2018, the bike shop generated the following revenues and incurred the following
\nexpenses:
\nSales, Rental, & Service Revenue $ 345,000.00
\nInventory purchased 125,000.00
\nInventory on hand at December 31, 2018 80,000.00
\nRent from (August 01 \u2013 December 31, 2018) 50,000.00
\nSalaries 30,000.00
\nSupplies 12,000.00
\nUtilities 7,500.00
\nPromotional expense 3,650.00
\nTravel to Trade Shows 2,500.00
\nMeals & Entertainment 1,800.00
\nPostage and Delivery 1,150.00
\nTelephone 2,150.00
\nAttorney fees 7,500.00
\nPre-startup investigative expense 52,200.00
\nOther relevant information:
\n\u2022 Bruce has decided that he wants to minimize his tax as much as legally
\npossible and has requested your Helpance in preparing his 2018 Federal
\nincome tax return.
\n3
\n\u2022 Bruce has asked you to depreciate as much of the capital expenditures as
\nlegally possible, but does not want to use IRC Sec 179 or first year bonus
\ndepreciation.
\n\u2022 The company has adopted the accrue method of accounting for inventory and
\ncash method for all other purposes.
\n\u2022 On March 15, 2018, York Technology Inc. filed for bankruptcy resulting in a
\ntotal loss for its\u2019 only two shareholders. Bruce and a friend founded the
\ncompany on May 15, 2015, with each owning 50% of the outstanding shares.
\nBoth Bruce and his friend each initially contributed $25,000 in exchange for
\ntheir 50% interest in the company.
\n\u2022 Bruce and Alice earned $1,500.00 interest income from savings in 2018.
\n\u2022 Bruce earned $3,500 in interest income from US Treasury Bonds in 2018.
\n\u2022 On October 18, 2018, Bruce received $4,200 of dividend income from JP
\nMorgan Chase Stock, which he purchased on September 01, 2018.
\n\u2022 On November 15, 2018, Bruce sold some of his JP Morgan Stock for $90,000,
\nwhich he purchased on July 01, 2017 for $67,000.
\n\u2022 Bruce was named as the sole beneficiary on his late mother\u2019s life insurance
\npolicy, and on December 31, 2018, Bruce received a check for $100,000 from
\nthe insurance company, which he held and deposited on January 02, 2019.
\n\u2022 On June 13, 2018, Bruce sold 1,000 shares Citibank Stock for $20,000. He
\npurchased the stock on July 17, 2017 for $85,000.
\n\u2022 On November 04, 2018, Alice received a settlement award for injuries
\nsustained in 2017. The settlement award included the following amounts:
\no Reimbursements of medical expenses which were not deducted on
\nprevious tax returns $13,700
\no Loss income $16,300
\no Punitive damages $25,000
\no Compensatory relating to a broken leg $38,000
\n\u2022 On November 03, 2018, Bruce determined that a personal loan to a friend was
\nuncollectible because his friend had recently and unexpectedly died. The
\namount of the loan was $5,000.
\n\u2022 Bruce collected $8,500.00 per month for three months (October \u2013 December)
\nin rental income on 685 Atlantic Avenue. For 2018 Bruce paid mortgage
\ninterest of $10,000 and real estate taxes of $8,000.00. Bruce paid no other
\n4
\nexpenses in 2018 for 685 Atlantic Avenue. The property was placed in service
\non October 01, 2018.
\n\u2022 Other Rental Income and Expenses for 2018 included:
\nPinebrook Property Avenue A Property
\nRental Income $70,000.00 $135,000.00
\nMortgage Interest Expense $12,000.00 $18,000.00
\nReal Estate Taxes $7,000.00 $14,000.00
\nUtilities $2,500.00 $8,500.00
\nInsurance $2,750.00 $5,700.00
\nWater & Sewer $1,100.00 $3,350.00
\nPlace in Service 01\/01\/2010 01\/01\/2018
\nPurchase Price $675,000.00 950,000.00
\n\u2022 Bruce and Alice 2018 W-2 statement shows the following wages and
\nwithholdings:
\nAlice Bruce
\n1) Wages $45,000 $65,000
\n2) FWT 5,000 6,500
\n3) SWT 3,000 3,500
\n4) CWT 2,500 1,900
\n\u2022 The Jones also paid the following personal expenses in 2018:
\na. Contributions to Museum of Modern Art (a 50% Organization):
\ni. Cash $25,000
\nii. JP Morgan Chase Stock -FMV $32,000
\n(Long Term) -A\/B $30,800
\nb. Real Estate Taxes on primary residence $10,500
\nc. Mortgage Interest on primary residence $15,600
\nd. Student loan Interest $4,800
\nInstructions: Make realistic assumptions about any missing or inconsistent data and state
\nyour assumptions on a separate typed schedule.
\nRequired:
\ni. Prepare form 1040, including all schedules and forms for 2018. (Do not prepare
\nNYS or NYC tax returns).
\nii. Taxpayers wishes to use the Reduce Deduction Election for charitable donations.
\niii. All work must be typed onto approved IRS forms (no hand written forms will be
\naccepted).
\niv. Read chapter 8 to determine how to handle depreciation\/amortization.
\nv. Only hand in the appropriate forms and schedules.<\/p>\n","protected":false},"excerpt":{"rendered":"
1 Individual Income Taxation Prof. E. Gary Class Project Due December 05, 2019 Alice J. and Bruce M. Jones are married taxpayers who file a\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7641,8827,10535,10533,10534,10531,10529,6744,10532,10530,7741],"tags":[10553,10549,10616,10615,7687,10254,10627,10104,10247,8857,10552,10295,10900,2984,3903,10548,10622,8901,10551,8907],"class_list":["post-128062","post","type-post","status-publish","format-standard","hentry","category-australia-essay-writers","category-australia-essays","category-do-my-university-assignment-for-me","category-essay-pro-dissertation-writers","category-homework-help-services-best-websites","category-i-need-help-writing-a-page-paper-assignment","category-masters-essays","category-nursing-studybay","category-pay-someone-to-write-a-paper-for-you","category-website-that-writes-assignments","category-studybay","tag-1-assignment-help-online-service-for-students-in-the-usa","tag-ai-plagiarism-free-essay-writing-tool","tag-australian-best-tutors","tag-best-trans-tutors","tag-buy-essay-uk","tag-can-someone-write-my-assignment-for-me","tag-cheap-dissertation-writer","tag-essypro","tag-help-me-write-my-dissertation","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-homework-for-you","tag-nursing-bay","tag-nursing-essay","tag-nursing-study-bay","tag-online-essay-writers","tag-phd-essays","tag-studbay","tag-write-my-assignment-help-for-college-students","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/128062","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=128062"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/128062\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=128062"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=128062"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=128062"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}