The following additional information is available for the Albert and

The following additional information is available for the Albert and Allison Gaytor family from Chapters 1 and 2. On September 1, Allison opened a retail store that specializes in sports car accessories. The name of the store is “Toge Pass.” The store is located at 617 Crandon Boulevard, Key Biscayne, FL 33149. The store uses the cash method of accounting for everything except inventory which is kept on an accrual basis. The store’s EIN is 98-7321654. Allison purchased inventory in August and thus started her business on September 1 with $40,100 of inventory. The Toge Pass accountant provided the following financial information: 

A review of the expense account detail reveals the following: 

The travel expense includes the costs Allison incurred to attend a seminar on sports car accessories. She spent $300 on airfare, $400 on lodging, $90 on a rental car, and $150 on meals. Allison has proper receipts for these amounts. 

The gift account details show that Allison gave a $30 gift to each of her six best suppliers. 

The supplies expense account detail reflects the purchase of 250 pens with the “Toge Pass” logo inscribed on each pen. Allison gave the pens away to suppliers, customers, and other business contacts before the end of the year. 

Uniforms expense reflects the cost to purchase polo shirts Allison provided for each employee (but not herself). The shirts have the Toge Pass logo printed on the front and back and are the required apparel while working but otherwise are just like any other polo shirts. 

The license and fee account includes a $900 fine Toge Pass paid to the state of Washington for environmental damage resulting from an oil spill.

Allison drove her 2010 Ford Explorer 1,701 miles for business related to Toge Pass. The Explorer was driven a total of 11,450 miles for the year. Included in the total 11,450 miles is 5,000 miles spent commuting to the store. Allison has the required substantiation for this business mileage. She uses the standard mileage method. In July, Albert loaned a friend $7,000 so he could buy a car. Albert’s friend lost his job in 2018 and stopped making payments on the loan. He plans to start making payments again, however, with additional interest as soon as he has new employment. In late 2018, Albert started to mount and stuff some of his trophy fish to display in his “man cave” at the Gaytor’s home. Some of his friends liked Albert’s taxidermy work and asked him to prepare a couple of trophy fish for them as well. Although he doubts he will ever sell any more stuffed fish, he was paid $150 and had no expenses related to this activity in 2018. 

Required: 

Combine this new information about the Gaytor family with the information from Chapters 1 and 2 and complete a revised 2018 tax return for Albert and Allison. Be sure to save your data input files since this case will be expanded with more tax information in later chapters. 

Albert Gaytor and his wife Allison are married and file

Albert Gaytor and his wife Allison are married and file a joint return for 2018. The Gaytors live at 12340 Cocoshell Road, Coral Gables, FL 33134. Captain Gaytor is a charter fishing boat captain but took 6 months off from his job in 2018 to train and study for his Masters Captain’s License. 

In 2018, Albert received a Form W-2 from his employer, Coconut Grove Fishing Charters, Inc.: 

The Gaytors have a 17-year-old son, Crocker, who is a full-time freshman at Brickell State University. The Gaytors also have an 18-year-old daughter, Cayman, who is a part-time student at Dade County Community College (DCCC). Cayman is married to Sean Slacker, who is 19 years old and a part-time student at DCCC. Sean and Cayman have a 1-year-old child, Wanda Slacker (Social Security number 648-99-4306). Sean, Cayman, and Wanda all live in an apartment up the street from Albert and Allison during the entire current calendar year. Sean and Cayman both work for Sean’s wealthy grandfather as apprentices in his business. Their wages for the year were a combined $50,000, which allowed them to pay all the personal expenses for themselves and their daughter. Albert and Allison have a savings account and received the following Form 1099-INT for 2018: 

Required: 

Use a computer software package such as Intuit Proconnect to complete Form 1040 for Albert and Allison Gaytor for 2018. Be sure to save your data input files since this case will be expanded with more tax information in later chapters. Make assumptions regarding any information not given.

Jason and Mary are married taxpayers in 2019. They are

Jason and Mary are married taxpayers in 2019. They are both under age 65 and in good health. For 2019 they have a total of $41,000 in wages and $700 in interest income. Jason and Mary’s deductions for adjusted gross income amount to $5,000 and their itemized deductions equal $18,700. They have two children, ages 32 and 28, that are married and provide support for themselves. 

a. What is the amount of Jason and Mary’s adjusted gross income? 

b. What is the amount of their itemized deductions or standard deduction?  

c. What is their taxable income?

Jason and Mary Wells, friends of yours, were married on

Jason and Mary Wells, friends of yours, were married on December 30, 2019. They know you are studying taxes and have sent you an e-mail with a question concerning their filing status. Jason and Mary would each like to file single for tax year 2019. Jason has prepared their taxes both as single and married filing jointly, and he has realized that the couple will get a larger combined refund if they each file single. Jason argues “that it’s not as if we were married for very long in 2019.” Prepare an e-mail to respond to Jason and Mary’s inquiry

For each of the following situations (none of the taxpayers

For each of the following situations (none of the taxpayers claim dependents), indicate whether the taxpayer(s) is (are) required to file a tax return for 2019. Explain your answer. 

a. Helen is a single taxpayer with interest income in 2019 of $8,750. 

b. Joan is a single college student who is claimed as a dependent by her parents. She earned $1,550 from a part-time job and has $1,150 in interest income. 

c. Leslie, age 64, and Mark, age 66, are married and file a joint return. They received $17,800 in interest income from a savings account. 

d. Ray, age 60, and Jean, age 57, are married and file a joint tax return. Their only income is $14,700 in interest income. 

e. Harry, a 19-year-old single taxpayer, had net earnings from self-employment of $1,500.

Joe is a self-employed information technology consultant from San Francisco,

Joe is a self-employed information technology consultant from San Francisco, CA. He takes a week-long trip to Chicago primarily for business. He takes two personal days to go to museums and see the sights of Chicago. How should he treat the expenses related to this trip? 

a. One hundred percent of the trip should be deducted as a business expense since the trip was primarily for business. 

b. Fifty percent of the trip should be deducted as a business expense since the IRS limits such business expenses to 50 percent of the actual cost. 

c. The cost of all of the airfare and the business days should be deducted, while the cost of the personal days are not deductible.

d. None of the expenses are deductible since there was an element of personal enjoyment in the trip.

Your supervisor has asked you to research a potential tax

Your supervisor has asked you to research a potential tax deduction for a client, Randall Stevens. Randall is a bank loan officer that lives in Portland, Maine. His specialty is marine loans; in particular, loans for the renovation of classic boats. Over the years, Randall has developed a very unique expertise in valuation of classic boats and is considered a global expert in the field. In 2019, Randall is hoping to attend the North American Classic Marine Boat Show that takes place in Zihuatanejo, Mexico. Randall attends the show more or less every year in order to stay current on classic boat valuations. Interested parties from around the world attend the show in the quaint Mexican coastal town. Randall’s costs to attend are $800 for show registration, $1,750 for airfare from Portland to Zihuatanejo, $2,400 for lodging. Meals are estimated at $600. 

Please prepare a letter for Randall that describes the issues he will face when attempting to deduct the cost of attending the show. Use IRS Publication 463 (available at www.irs.gov) to assist you.

Business with gross receipts of $25 million or less may

Business with gross receipts of $25 million or less may treat inventory as nonincidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following: 

Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.

Beverly and Ken Hair have been married for 3 years.

Beverly and Ken Hair have been married for 3 years. Beverly works as an accountant at Cypress Corporation. Ken is a full-time student at Southwest Missouri State University (SMSU) and also works part-time during the summer at Cypress Corp. Ken’s birthdate is January 12, 1993 and Beverly’s birthdate is November 4, 1995. Bev and Ken’s earnings and income tax withholdings are reported on the following Form W-2s: 

The Hairs have interest income of $1,000 on City of St. Louis bonds. Beverly and Ken also received the following Form 1099-INT and 1099-DIV: 

Ken is an excellent student at SMSU. He was given a $1,750 scholarship by the university to help pay educational expenses. The scholarship funds were used by Ken for tuition and books. 

Last year, Beverly was laid off from her former job and was unemployed during January 2019. She was paid $1,825 of unemployment compensation until she started work with her current employer, Cypress Corporation. 

Ken has a 4-year-old son, Robert R. Hair, from a prior marriage that ended in divorce in 2014. During 2019, he paid his ex-wife $300 per month in child support. Robert is claimed as a dependent by Ken’s ex-wife. 

During 2019, Ken’s aunt died. The aunt, in her will, left Ken $15,000 in cash. Ken deposited this money in the Boatman’s Bank savings account. 

Required:

Complete the Hairs’ federal tax return for 2019 on Form 1040, Schedule 1, and the Qualified Dividends and Capital Gain Tax Worksheet.

Linda and Richard are married and file a joint return

Linda and Richard are married and file a joint return for 2019. During the year, Linda, who works as an accountant for a national airline, used $2,100 worth of free passes for travel on the airline; Richard used the same amount. Linda and Richard also used $850 worth of employee discount coupons for hotel rooms at the hotel chain that is also owned by the airline. Richard is employed at State University as an accounting clerk. Under a tuition reduction plan, Richard saved $4,000 in tuition fees during 2019. He is studying for a master’s degree in business at night while still working full-time. Richard also had $30 worth of personal typing done by his administrative assistant at the University. What is the amount of fringe benefits that should be included in Linda and Richard’s gross income on their 2019 tax return?