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Tax Return Project

Fundamentals of Taxation
ACCT 3350.001

Team 8
Date Submitted: 14 October 2017
1. (Ivanova), Daniela
2. (Diep), Kimberly

I did not seek assistance of any other student, friend, and colleague or use the solution
manual in the completion of this assignment.

Student signatures not initials are required



Comments and Questions
Roberts Income: For Roberts bonus, we have assumed that he is not in constructive receipt
of the bonus until the following January when it is paid with the given information. Therefore, his
bonus of $50,000 from 2015 paid in 2016 is recognized as income on his 2016 return. His
bonus for 2016 of $66,000 will be on his 2017 tax return. He also has withholding taxes of
100,000 in 2016. The fines and speed traps that Robert incurred on this business trips are
nondeductible. The plan that Robert contributed $20,000 is unclear, therefore; we cant decide
what plan he was contributing to and disregarded it.

Lisas Income: Lisas consulting income for 2015 mentions a $7,000 payment for work done in
2015. There is an additional $4,999 consulting work from 2015 deemed uncollectible from her
client in 2016. The $4,999 is not included in the $7,000 that was collected, and is not relevant
since Lisa is using cash basis. No official name for Lisas business is given so we have
assumed a name for her business as Lisa Smith CPA. We have also assumed she has no
employees other than herself. We have also assumed that 1099-MISCs have been received
from clients for the $120,000 in services collected in 2016.

Lisas Business Expenses: We assume that Lisa owns the vehicle and has started using her
car for work as of the purchase date in 2014. We have also assumed that she does not have
another vehicle available for personal use. Lisas does her work from her home office so we
assume that there is no commuting mileage. Due to these assumptions, we received a standard
mileage deduction of $4,320. For her new computer, since it is the first year of business use for
this asset, you may deduct its full value this year or spread the deduction over several years.
We decided to take the full deduction for 2016. In determining the deduction for dues for a
professional organization, the amount is based off $1,125. This is 10% less total dues because
10% is related to lobbying and PAC contributions.

Lisas Home Office: We assume that she uses her office exclusively for only her business and
does not share it with Robert or their children. This office is only for Lisas CPA business. Due to
this assumption, Lisas home office qualifies. We have also assumed that Lisa had began using
her home office for her business on January 1, 2012 and that she uses it 15 days every month,
for every month of the year. We also assume that Lisas conducts 80% of her business at her
home office and 20% at client premise. Weve also assumed that in 2015 she also used the
simplified method for her home office expenses.

Based on these assumptions, Lisas home office percentage is 10%. We are assuming that we
did not pay points when we took out the loan. The home equity loan interest of $10,000 used to
purchase her personal auto is nondeductible because it was refinanced for a personal use

Tylers Income: Tyler is a qualifies as a dependent but his wages exceed $6,300 which requires
him to file his own separate return.

K1: Partnership with OakTree: we assume that all of the investment in this activity is AT RISK.

Loan Repayment: We do not know the relationship between Sarah Duval and the Smiths. This
loan repayment reason is unclear; we dont know when the loan repayment is supposed to be
received and what for. The cash gift from Lisas parents of $20,000 and Tylers income is below
the relevance line for reporting. We assume that Tyler is still dependent because he is full time
and is able to save most of his savings and is living with his parents.

Stock Transactions: For the stock Pfizer Corp, we have assumed a fair market value of $2,000
on 5/12/89 on the date of the gift receipt. For the stock TI, we disregarded the shares because
shortly after the purchase, they received a nontaxable dividend. We are assuming the only stock
that was a gift is the Pfizer and the others are purchased. The Netflix stock is disregarded as it
is now worthless.

Donations/Contributions: We did not include the contributions to indigent local family because
it is not for public purpose and to an organization. We are going to disregard the contribution to
the Committee to elect the BillHill President as it is not a charitable organization. If you work in
US, and make donation to Canada, it is nondeductible in this scenario.

Gambling Winnings: What state are the gambling winnings from? This could require a state
return depending on where they were won from. We were only able to deduct losses up to the
Smiths winnings, of $8,000.

Health Insurance: Weve assumed that the Smiths had health insurance coverage for all of

Medical Expenses: Deductions were received for unreimbursed medical and dental expenses
not covered by insurance.

Tuition Expenses: Tyler is a full time student and is attending UTD. We assume that no 1098-T
was received. Since he has most of his earnings in a savings account, his parents are financing
his education expenses. We used UTDs Fall 2016 Catalog to value the tuition and for one
semester, it estimated tuition cost of $5,903 for 15 credit hours. Off the same estimator, books
and supplies are estimated at $600. We assume that Tyler did not receive any scholarship or
grants for the Fall semester.

Tax Return