Kara and Brandon Arnold are married and file a joint

Kara and Brandon Arnold are married and file a joint return. Their Social Security numbers are 000-00-1111 and 000-00-2222, respectively. Kara and Brandon have one son, Henry, age 3. His Social Security number is 000-00-3333. They live at 356 Welcome Lane, Woodbury, WA 84653. They report their income on the cash method. During 2017, they report the following items:



Interest income from money market accounts


Dividend income from Davis Corp. stock


Cash contributions to church


Rental of a condominium in Lutsen:

Rental income (30 days)


Interest expense


Property taxes




Depreciation (entire year)




Days of personal use


The address of the Condo is 1127 Skyline Drive, Lutsen, WA 84666. During the year the following events also occur:
a. In 2015, Brandon had loaned a friend $3,000 to help pay medical bills. During 2017, he discovers that his “friend” has skipped town.

b. On June 20, 2017, Brandon sells Kim stock for $16,000. He purchased the stock on December 12, 2011 for $22,000.

c. On September 19, 2017, Kara discovers that the penny stock of Roberts, Inc. she purchased on January 2 of the prior year is completely worthless. She paid $5,000 for the stock.

d. Instead of accepting $60 the utility store offers for their old dishwasher, they donate it to Good,vill on November 21, 2017. They purchased the dishwasher for $750 on March 30, 2007. The new dishwasher cost $900.

e. Kara and Brandon purchased a ne,v residence for $250,000. As part of the closing costs, they pay two points, or $3,800, on the mortgage, which is interest rather than loan processing fees. This payment enables them to obtain a more favorable interest rate for the term of the loan. They also paid $8,400 in interest on their mortgage on their personal residence.

f. They pay $4,100 in property taxes on their residence and $7,500 in state income taxes.

g. On July 20, 2017, Kara and Brandon donate 1,000 shares of Anton, Inc. stock to the local community college. The value of the stock on that date is $10,200. Anton, Inc. is a listed stock. They had purchased the stock on November 10, 2010 for $1,000.

h. $7,000 in federal income tax ,vas ,vithheld during the year.

Complete Kara and Brandon’s Form 1040, Schedules A, B, D, and E, Form 8283 and Form 8949. For purposes of this problem, disregard the alternative minimum tax and any credits.

Spencer Duck (SSN 000-22-1111) is single and his eight-year-old son,

Spencer Duck (SSN 000-22-1111) is single and his eight-year-old son, Mitch, lives with him nine months of the year in a rented condominium at 321 Hickory Drive in Ames, Iowa. Mitch lives with his mother, Spencer’s ex-wife, during the summer months. His mother provides more than half of Mitch’s support and Spencer has agreed co allow her to claim Mitch as her dependent. Spencer has a salary of $39,000 and itemized deductions of $4,000. Taxes withheld during the year amount co $3,221. On July 14 of the current year, he sold the following assets:

• Spencer received a K-1 from a indicating that his share of the STCL is $200.

• Land was sold for $35,000. The land was received as a property settlement on January 10, 2008, when the land’s FMV amounted to $30,000. His ex-wife’s basis for the land, purchased on January 10, 2000, was $18,600.

• A personal-use computer acquired on March 2 last year for $4,000 was sold for $2,480.

• A membership card for a prestigious country club was sold for $8,500. The card was acquired on October 10, 2003, for $6,000.

• Marketable securities held as an investment were sold for $20,000. The securities were inherited from his uncle, who died on March 10 of the current year when FMV of the securities was $21,000. The uncle purchased the securities on May 10, 1990, for $10,700.

In addition to the above sales, Spencer received a $100 refund of state income taxes paid last year. Spencer used the standard deduction last year to compute his tax liability. Prepare Form 1040 and Schedule D for the current year.

A. J. Paige, Social Security number 111-22-3333, is the vice

A. J. Paige, Social Security number 111-22-3333, is the vice president of marketing (Australia) for International Industries, Inc. (III). III is headquartered at 123 Main Street, Los Angeles, California 92601. A. J., who is single, accepted the position and became a resident of Australia on July 8 of last year. Her business address is 242 Main, Wescview, Australia. Westview is not designated as a high housing cost city. A. J.’s visa permits her to stay in Australia indefinitely. Her only trips co the United States in the current year were for vacations (August 2 to 16 and December 21 to 28). A. J.’s contract specifies that her appointment is to last indefinitely, but states that III is co pay her $4,000 per year to cover the cost of tVO vacation trips co the United States. Her salary is $140,000, out of which she pays rent on an apartment of $34,000 per year. A. J. has no family or residence in the United States. She paid an income tax in Australia of $23,500. Complete a Form 2555 for 2017.

Heather and Nikolay Laubert are married and file a joint

Heather and Nikolay Laubert are married and file a joint income tax return. Their address is 3847 Jackdaw Path, Madison, WI 58493. Nikolay’s Social Security number is 000-00-1111, and Heather’s is 000-00-2222. Nikolay is a mechanical engineer, and Heather is a highly renowned speech therapist. She is self-employed. They report all their income and expenses on the cash method. For 2017, they report the following items of income and expense:

Heather and Nikolay sold the following assets:

Heather owned the KLN stock and sold it to her brother, Jacob. Heather and Nikolay used the motorcycle for personal recreation.

In addition to the items above, they donate Miner stock to their community church. The FMV of the stock on the date it is donated (8/18/17) is $6,200. It cost $2,700 when purchased on 3/12/98. Heather and Nikolay’s home is burglarized during the year. The burglar stole an entertainment system (FMV $3,500; cost $5,000), an antique diamond ring and pendant (FMV $12,000; cost $10,000), and a painting (FMV $1,500; cost $1,300). The insurance company pays $1,500 for the entertainment system, $4,000 for the jewelry, and $500 for the painting. Complete Heather and Nikolay’s Form 1040, Schedules A, C, D, and SE, Form 4684, and Form 8283. For purposes of this problem, disregard the alternative minimum tax and any credits.

Huge Corporation reports the follo,ving balance sheet for the current

Huge reports the follo,ving for the current year:

Huge reports the following income and expenses for the year:





Dividend from 100%-owned subsidiary


Dividend from less-than-20%-owned corporation


Salaries (including officers’ salaries of $30,000)






State and local taxes


Interest expense


Financial accounting depreciation


MACRS depreciation


Federal income tax expense per books


In addition, Huge reported an NOL carryover of $12,000 from the preceding year and paid current year estimated taxes of $10,000.
Prepare a current year Form 1120 (U.S. Income Tax Return) for Huge.
Leave spaces blank on Form 1120 for information not provided. Note: You should prepare a schedule of net income per books to complete Line 1 of Schedule M-1.

At the beginning of 2017, Donna Harp was employed as

At the beginning of 2017, Donna Harp was employed as a cinematographer by Farah Movie, Inc., a motion picture company in Los Angeles, California. In June, she accepted a new job with Ocala Production in Orlando, Florida. Donna is single and her Social Security number is 000-00-1111. She sold her house in California on August 10 for $500,000. She paid a $14,000 sales commission. The house was acquired on March 23, 1990, for $140,000. The cost of transporting her household goods and personal effects from California to Orlando amounted to $2,350. To travel from California to Florida, she paid travel and lodging costs of $370 and $100 for meals.

On July 15, she purchased a house for $270,000 on 1225 Minnie Lane in Orlando. To purchase the house, she incurred a 20-year mortgage for $170,000. To obtain the loan, she paid points of $3,400. The $3,600 of property taxes for the house in Orlando were prorated with $1,950 being apportioned to the seller and $1,650 being apportioned to the buyer. In December of the current year she paid $3,600 for property taxes. Other information related to her return:

Salary from Farah Movie, Inc.


Salary from Ocala Production, Inc.


Federal income taxes withheld by Farah


Federal income taxes withheld by Ocala


FICA taxes withheld by Farah


FICA taxes withheld by Ocala


Interest income from Sun National Bank


Dividend income (qualifying dividends)


Interest paid for mortgage:

Home in California


Home in Orlando


Property taxes paid in California


Sales taxes paid in California and Florida


State income taxes paid in California


a. Determine the amount of recognized gain on the sale of the residence.
b. Prepare Forms 3903, 8960, and 1040, including Schedules A, B, and D.

In 2017, Micah Johnson (SSN 000-22-1111) is employed as a

In 2017, Micah Johnson (SSN 000-22-1111) is employed as a manager and incurs the following unreimbursed employee business expenses:

Johnson receives a $7,800 reimbursement for the travel expenses. He did not receive any reimbursement for the auto expenses. He uses his personal automobile 80% for business use and placed his current automobile in service on October 1, 2013. Total business miles driven during the year amount to 26,400, his commuting miles in 2017 amount co 2,000 (average daily roundtrip of 7 miles), and other personal miles amount to 4,600 miles. Johnson’s AGI is $60,000, and he has no other miscellaneous itemized deductions.

a. Calculate Johnson’s expense deduction using the 2017 Form 2106 (Employee Business Expenses) based on actual automobile expenses and other employee business expenses.

b. Calculate Johnson’s expense deduction for 2017 using the standard mileage rate method and other employee business expenses. (Assume that none of the restrictions on the use of the standard mileage rate method are applicable.)