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assignment_for_unit_7_8.doc
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ACC130 Cumulative Assignment
Do not use tax software. Use 2016 tax law and forms.
Instructions:
1. Prepare the 2016 Form 1040 and all other required Federal
forms and schedules for Brett Simons. The returns should be
prepared taking the maximum tax benefit allowable into
consideration. Round all amounts to whole dollars.
2. Do not prepare tax returns for any other individuals mentioned
in the problem.
3. The ages provided in the problem are determined as of
12/31/16.
4. Student must not use tax software. Prepare return using 2016
tax forms provided or found at www.irs.gov.
5. Important Requirement! Any and all amounts excluded from
income or deductions either limited or not taken must be
identified. All calculations used in the determination of the
components of taxable income or tax liability must be provided.
This requirement should be provided in a separate file (Word or
Excel) and must be submitted with the completed tax return.
6. Work independently. Do not collaborate with anyone.
Collaboration or assistance, in any form, is considered cheating
and will result in a grade of zero for any student(s) involved.
7. Brett Simon’s tax return must be saved as a PDF file and
submitted to the relevant assignment link at Unit 7 (in addition
to the documents required by #5 and #8 of this document). This
assignment is subject to the 10% late submission discount.
8. Page 1 of this document (with your name inserted) must be
returned as part of your submission; points will be deducted if it
is not attached.
Facts:
1
ACC130 Cumulative Assignment
Brett Simons, age 45, is single and resides at 66 Mason Lane, Waterbury, CT
06069. His social security number is 123-45-6788. Brett has two children, Alec
(age 17) and Grace (age 8), and their social security #’s are 049-52-5472 and
045-23-5432 respectively. Brett’s mother, Donna Simons (age 70, social security
#048-68-5874) lives at 50 Benton Street, West Haven, CT. Donna receives
Social Security income of $10,000 per year and $8,000 in part-time wages. Brett
pays ABC Afterschool Care (EIN: 01-123456) $200 per week to watch Grace after
school (40 weeks). Brett does not want to designate $3 to the Presidential
Election Campaign fund.
On New Year’s Eve 2012, Brett’s wife Susan, was tragically killed in an
automobile accident caused by a drunk driver. Brett survived the accident
sustaining a broken leg and arm. He filed a lawsuit with respect to his injuries
which was settled in 2016 awarding compensatory damages of $60,000 and
punitive damages of $10,000.
Brett was the named beneficiary of Susan’s $100,000 life insurance policy. Brett
was given the option by Liberty Mutual to either receive the entire proceeds as
one payment in 2012 or to receive $25,000 per year for five years. Brett chose
to receive the proceeds in installments, the fourth of which was received in
February, 2016.
Due to the loss of his wife, Brett decided that he should work from home. In
December of 2015, he retired from his job as a Waterbury police officer and
started his own security company on January 1, 2016. He continued to work
part-time for the Police Department in 2016. His W-2 from the Waterbury Police
Department (EIN 06-1234567) reported the following: wages $28,000, federal
income taxes withheld $6,500, and Connecticut income taxes withheld $4,000.
WPD withheld the proper amounts of social security and medicare taxes from
Brett’s pay during the year. Brett was not a participant in WPD’s retirement
plan.
Brett’s business “Security For Hire” (taxpayer I.D. #06-7654321) opened for
business on January 1st. He uses the cash method of accounting and materially
participates in the operation of this business. Brett uses his finished basement
as his office. It has a separate entrance for clients and occupies approximately
600 of the 3,000 total square footage of his home. The home cost $300,000 at
acquisition (1/1/2010 and does not include cost of land). Brett rents all
necessary office furniture and equipment however repairs to the walls and
painting were required to make the office client ready. The total cost for the
wall repairs and painting was $3,000.
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ACC130 Cumulative Assignment
Revenue and expenses for Safe & Secure for the year were as follows:
Security services Revenue
Alarm monitoring services Revenue
Equipment rent expense
Business insurance expense
Advertising expense
Legal expenses
Wages paid to his employee
Payroll taxes paid on employee wages
Office Supplies Expense
Liability Insurance Expense
$60,000
$15,000
$10,000
$700
$800
$300
$13,000
$1,400
$9,000
$300
Brett received the following interest and dividend income in 2015 (he did not
have any interest in a foreign account or trust):
Webster Bank
Waterbury Credit Union
Multistate Municipal Bonds
Interest
$600 UTC Corporation**
$200 Ace Corporation**
$300 Walmart**
Dividends
$2,000
$900
$500
**Non-Qualified dividends
On November 1, 2010, Brett and Susan invested in Ace Corporation by
purchasing 100 shares at $40/share. Concerned about the future of the
company, he sold the shares at $5/share on February 1, 2016. Brett received a
Form 1099-B from his investment company that reported the sale and basis of
the stock sold.
Prior to meeting Susan, Brett was married to Elaine, (social security #321-546789). Pursuant to their divorce agreement, Brett is required to make monthly
alimony payments of $500 to Elaine. Brett faithfully makes each month’s
payment.
Alec graduated high school in June and decided to study chemistry at a state
university. He received an academic scholarship of $10,000 towards his first
year tuition expenses of $18,000. In addition, he took a student loan for $3,000
to pay for room and board. Brett paid the balance of Alec’s tuition costs from
Brett’s savings account.
3
ACC130 Cumulative Assignment
Brett paid (and can substantiate) the following during the year:
Health insurance premiums for Brett and kids (paid during 2016)
Interest on personal credit card
Dental expenses (Grace’s braces)
Mortgage interest (Mason Lane) (Total mortgage < 1,000,000)
Real estate taxes (Mason Lane)
Mortgage interest (Donna’s home)
Property taxes (assessed on car’s value)
Utilities for residence
Homeowner’s insurance
Contributions to church
Used furniture donated to Goodwill (FMV) (Cost = 1,000)
Cost of one dinner ticket to attend a fundraiser for the “Republican
National Committee”; value of a comparable dinner = $50
$9,800
$500
$2,000
$6,000
$3,000
$1,000
$300
$5,000
$900
$400
$800
$475
Brett did not keep mileage records for medical or charitable contribution
deduction purposes.
In 2016, Brett paid a balance of $1,200 with his 2015 Connecticut income tax
return. He also made state estimated tax payments totaling $1,200 ($300 on
each of the following dates 4/15/16, 06/15/16, 09/15/16 and 01/15/17).
In 2016, Brett made federal estimated tax payments totaling $4,400 ($1,100 on
each of the following dates 4/15/16, 06/15/16, 09/15/16 and 01/15/17).
In the event he is due a refund of tax, Brett would like to apply all of his
overpayment to his 2017 tax liability.
4
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