INDIVIDUAL TAX RETURN PROJECT SALLY JENKS

INDIVIDUAL TAX RETURN PROJECT SALLY JENKS
INDIVIDUAL FEDERAL INCOME TAX RETURN 2015-2016 ANNUAL EDITION
ALL DATES RELATE TO YEAR 2015 UNLESS STATED OTHERWISE
Sally A. (age 47), SSN 111-22-1111, is a widow of Robert Jenks, SSN 123-45-6787, who passed away on March 19, 2012. Sally resides at 23 Ottawa Street, Portland, ME 04112. Sally works part-time as a Bookkeeper at a local CPA Firm (John Smith CPA) and is also self-employed.
She owns her own Bookkeeping business that she operates in town.
The following filing information relates to Sally:
• Sally is not sure what filing status she should be in 2015 since her husband passed away in
2012.
• Sally elects to contribute to the Presidential Election Campaign Fund.
• Sally is a calendar year taxpayer.
• Sally follows the cash b asis method.
• Sally prefer that any tax overpayment to be refunded to her.
• Round all cents to the nearest dollar (Round up .50 Round down .49) No cents on the return.
1. Sally’s annual salaries from John Smith CPA is included on the attached W-2’s. John Smith
CPA does not provide any retirement benefits. Sally has a retirement account that she
contributes to through her business.
2. Sally is a bookkeeper who owns a bookkeeping business called “Add-it-Up”. Sally rents
office space in the Old Port, on 45 Commercial Street, Portland, ME 04112. She also makes
deliveries of monthly accounting records to her clients. She uses her personal car to make the
deliveries. Her professional activity code is 541219 and her employer identification number is
04-9876543. Her clients consist of small to medium size local businesses. Sally collected
$101,874 in revenues during 2015. This total includes a $1,750 payment for work she performed
in 2014 and does not include $5,000 she billed in December for work performed in late 2015. In
addition, Sally has an unpaid bill from a client for $3,200 for work she performed in 2013. This
client has not been heard from since December 2013. Sally has tried to locate this individual to
no avail. Sally feels certain that she will never collect the $3,200 she is owed.

Her business expenses for 2015 are as follows:
Wages
Entertainment (on perspective clients)
Office Expense
Advertising
Legal Fees
Utilities
Speeding Ticket
Rent
Health Insurance (this policy covers the whole family)
Business portion of Repairs, Gas and Oil on Toyota

$37,875
2,200
11,700
1,987
975
2,125
275
7,000
5,200
1,750

In addition, Sally drove her 2013 Toyota (purchased on June 1, 2013) 1,925 miles to deliver
accounting records to her clients. Sally does not know if she can take the standard mileage,
actual cost allocated to the car or both. Sally drove the car a total of 10,500 miles in 2015.
Sally utilized the following assets in her bookkeeping business:
Description
of Property:
Computer
Printer
Filing Cabinets
Laptop
Monitor

Date Placed Adjusted Basis when
into Service: Placed into Service:
7/1/13
7 /7/14
1/21/14
2/9/15
8/28/15

$2,110
3 ,250
2,950
2 ,510
1,875

Business
Use:
100%
100%
100%
100%
100%

All of the assets listed above were purchased new by Sally on the date they were placed into
service. For Assets placed in service in 2015, Sally elected the cost recovery method that
yielded the highest possible cost recovery deduction method for that year.
For assets purchased prior to 2015, all of these assets were depreciated under the MACRS
method (None were depreciated under Section 179). For each year of acquisition, the highest
possible deduction under MACRS was elected. Accordingly the expense method of §179 was
not elected.
No additional first year depreciation was taken in any year.

3. In November 2013 Sally was hit by a car while walking her dog. The driver of the car was at
fault and Sally sued the driver for various damages. Sally spent some time in the hospital to
recover from her injuries. The court case didn’t start until September 2014 and in early 2015
Sally won the case. The driver of the car was determined to be at fault and Sally was award
damages totaling $215,000. The damages awarded were $200,000 for personal injury, $5,000
for punitive damages against the driver and $10,000 for loss of income because her injuries
prevented her from working for some time.
4. A. Sally sold stock that was reported on Form 1099-B (attached to the back of this packet)
B. Sally also sold the following capital assets which are not reported on and Form
1099-B:
• 600 shares of KitKat Corp. The shares were purchased by Sally for
$2,150 on the New York Stock Exchange on January 15. They were sold
on the New York Stock Exchange for $2,750 on November 5.
• 1,820 shares of 5 Cent Bank. These shares were distributed to Sally from
the estate of Robert on July 28, 2010. The shares were worth $19,850 as
of the date of Robert's death but were worth $18,900 on the date of
distribution to Sally. Sally, acting as the executrix of Robert's estate did
elect the alternate valuation method. Robert bought the shares for
$12,888 on October 12, 1992. Sally sold the shares to an unrelated party
on May 15 for $17,630.
• 400 shares of Hershey Corporation. These shares were received by Sally
as a gift from her sister on August 17, 2005. Her sister's basis in the stock
at the time of the gift was $5,980. The fair market value of the stock at the
time of the gift was $8,800. No gift tax was paid on the transfer. The
shares were sold to an unrelated party on September 9 for $7,400.
• 9,700 shares of Boston Bay. The shares were purchased by Sally on
January 12, 2010 for $3,100. During 2015, Boston Bay declared
bankruptcy and liquidated. No assets were transferred to the shareholders
during the liquidation.
• Sally has a long-term capital loss carryover of $2,500 from 2014
All of the capital assets listed above were held by the Sally for investment purposes.
5. In early 2015, Sally learned that her cousin, Billy, who borrowed money to open a new
business passed away. Sally loaned Billy $2,000 to help with the new business. Sally had him
sign a note due in one year. Shortly after Sally loaned the money to Billy, he passed away. As of
December 2015, Sally has been told that there will be no payment on the note and it is
completely worthless.

6. Besides the items previously noted, the Sally had the following receipts for 2015:
Interest income:
City of Portland bonds
Apple Corporate bonds
5 Cent Bank

$1,400
475
440

Cash gifts from Sally’s parents
Federal income tax refund (2014 return)
Gambling Winnings

15,000
1,280
3,250

$ 2,315

Sally was the beneficiary of a life insurance policy that his uncle purchased on his own life.
Sally’s uncle passed away on April 2. Sally collected $60,000 from the life insurance policy on
November 1.
7. In addition to the items already noted, the Sally had the following expenditures for 2015:
Sally’s contribution to her Keogh Plan/SEP Plan
Gambling loss
Life insurance premiums
Medical and dental expenses for Sally
Medical expenses paid by Sally for Melissa

$5,000
4,500
2,400
7,500
4,025

Taxes:
Taxes on Real Estate
Ad valorem taxes on personal property
State and local sales taxes

$3,525
820
3,100

Interest paid on VISA credit card during the year
Interest paid on Sally’s car
Principle payments on Sally’s car loan

2,005
1,750
2,450

Cash Contributions:
Salvation Army (Maine branch)
Charity located in Canada
Cash given to a local family
Wyoming governor’s election campaign fund

3,000
500
300
350

7,445

4,150

The life insurance premiums relate to the universal life insurance policies that Sally owns. The
first beneficiary on both policies is Sally’s daughter. Sally contributed to the governor’s
campaign fund because she thinks his influence is key in getting business.

8. Sally house was burglarized on March 5 and her diamond necklace was stolen. Sally's
necklace was worth $33,000. Sally bought the necklace on November 9, 2010 for $15,500. The
necklace was never recovered. Insurance recovery was limited to $5,000.
9. Relevant Social Security numbers are as follows:
Name and Social Security Number
• Jake Ray Jenks, SSN 123-45-6783, son of Sally. Born December 3, 1992.
Full-time student at the University of Maine before graduating in May of 2015.
Jake lives with Sally and Sally provided 60% of his support. His income
consisted of wages of $19,000.
• Ronald Jenks, SSN 123-45-6784, son of Sally. Born August 2, 1993. Ronald works full
time in a restaurant. Sally provides 40% of his support while Ronald provides 30% and the
balance came from other sources. Ronald lives with Sally. His income consisted of wages
of $27,000.
• Roberta Jenks, SSN 123-45-6785, daughter of Sally. Born November 1, 1994.
Full-time student at UVM before graduating in May of 2015. Continued her
education full time at the UMass Medical School as a medical student. Sally
provided 70 percent of her support. Her income consisted solely of $10,000
earned from a part-time job in the medical field. She did live with Sally for the
year.
• Melissa Jenks, SSN 123-45-6786, daughter of Sally. Born May 12, 1996. Full-time
student at the University of New Hampshire. Sally provided 100 percent of her support.
She earned no income. She lived with Sally for the year.
Sally also supported the following person:
• Lillian Mainville, mother of Sally, SSN 123-45-6787. Widow. Born September 12, 1936.
Resided in Clearwater, Florida. Sally provided 85 percent of her total support. Her sole
income consisted of $4,775 of pension income and $8,000 of Social Security benefits.

Bernard Ray, cousin of Sally, SSN 123-45-6788. Widower. Born April 21, 1961.
Lived with Sally all year long. Sally provided 65 percent of his total support. His sole
income consisted of $9,100 of Social Security benefits
10. Sally made the following deposits with the United States Treasury for their
Federal income tax liability from their own personal checking account on the
dates indicated:





April 17, 2015
June 15,2015
September 17, 2015
December 15,2015

$500
500
500
500

11. All source documents for wages, dividends, stock sales and interest paid are at the end.
These items are not reported in any of the information above. Ignore the year on the source
documents and assume that they are all for the tax year 2015.

REQUIREMENT
Prepare the Federal income tax return with all supporting schedules and
attachments for Sally and Sally Frost for 2015. Specifically, submit the
following completed forms with required schedules:










Form 1040: U.S. Individual Income Tax Return
Form 1040 Schedule A: Itemized Deductions
Form 1040 Schedule B: Interest and Ordinary Dividends
Form 1040 Schedule C: Profit and Loss from Business
Form 1040 Schedule D: Capital Gains and Losses
Form 1040 Schedule SE: Self-Employment Tax
Form 4562: Depreciation and Amortization (For Schedule C)
Form 4684: Casualties and Thefts
Form 8949: Sales and Other Dispositions of Capital Assets

Use all opportunities to minimize tax liability. In this regard, assume that the
Sally always prefer to forego potential future tax savings in favor of current year
tax savings.
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