tax project

Project Description:

tax return project

assume that the taxpayers george (social security number 333-33-3333) and mary warden (social security number 444-44-4444) both are 50-years old, have good eyesight and live with their 3 children, edward, john and ruth at 789 sw coast drive, beach city, or 97999.

edward is a junior in college and is 20 years old. he worked during the summer and earned $4,000. john is a 17 year old high school student. he earned $3,500 during the year. this was their only income. ruth is eight years old. she had no income during the year. in august the wardens paid $6,500 in tuition for edward’s fall term, his junior year.

the wardens claim mrs. wardens mother grace taylor as a dependent. her social security number is 400-44-0044.

during 2007 mrs. warden was employed as a sales person by a publishing company. she received $58,000 in taxable wages and had $4,950 in federal income taxes withheld.

mrs. warden is not covered by her employer’s retirement plan. mrs. warden made a $1,500 contribution to a traditional ira and $2,000 to a roth ira.

the wardens received a $30 state income tax refund. they itemized in the prior year. they also received a $20 federal tax refund.

the wardens made estimated tax payments of $2,000 for 2007.

the warden’s incurred the following medical expenses during 2007: prescription drugs 1,000: doctor bills 3,550, hospitalization bills 1,750, transportation 100 and eyeglasses 500. in addition mr. warden who is self-employed paid 3,750 in premiums for health insurance for himself and his family.

the wardens paid their 2007 real estate taxes of 1,810 on july 1, 2007. they paid 1,700 in state income tax in 2007.

the wardens paid 4,200 in interest expense on their home. they also paid 3,000 in points when they purchased their new home in 2007. they paid interest of 600 for mrs. warden’s car and 400 in credit card debt.

the wardens gave 1,500 in cash to various recognized charities, no individual gift was 250 or more.

mrs. warden incurred employee business expenses in connection with her occupation as a sales person. in 2007, she purchased a new car that was used primarily for business. the car cost 23,000. during 2007 the car was driven a total of 20,000 miles of which 15,300 were business, 1,500 were commuting (five mile daily round trip) and 3,200 were other personal purposes. mrs. warden depreciates the car using macrs. the gas, oil and insurance on the car was 4,250. she paid 50 for parking fees and 75 for car rental while on a business trip. she paid 600 in interest on the loan to purchase the car. no sec 179 is claimed.

mrs. warden received 4,700 as a car expense reimbursement from his employer under an accountable plan. this 5,000 was not included on her w-2.

the wardens claim a 200 deduction for preparing their 2006 tax return, 35 for safe deposit rental and 250 for investment publications.

during 2007 the wardens received 725 in interest from coast national bank. they received 300 in interest from tax-exempt bonds.

they received the following ordinary dividends: 750 from consolidated tapioca, a nonqualified foreign corporation, 235 from secure money market fund and 385 from rapid growth mutual fund. they also received a 300 capital gain distribution from rapid growth.

during 2007 the wardens sold the following capital assets: 1) on feb 2, 100 shares of ahab inc were sold for 1,400. they were purchased on nov 12, 2006 for 2,800. 2) on nov 5, 200 shares of pequod were sold for 5,300. they were purchased for 2,400 on jan 5, 2007. 3) on dec 4 100 shares of squall were sold for 10,400. they were purchased for 5,300 on jan 4, 1994. 4) on dec 10, 2000 shares of kismet, inc. were sold for 4,000. they had been purchased for 1,800 on sept 5, 2000. 5) on dec 15 a number of gold coins were sold for 4,000. they were purchased for 3,000 on october 15, 1999.

the wardens own and rent a home located in oceanside, or. there was no personal use in 2007. mr. warden actively participates in the operation of the home. rents of 12,000 were received in 2007. their expenses are as follows: 2,500 of cleaning and maintenance: 6,000 of mortgage interest, 800 repairs, 250 advertising, 750 insurance, and 2,000 of real estate taxes. the home was purchased in 1997 for 160,000 with 63,750 allocated to the land.

during 2007, the wardens daughter ruth attended a child care center. happy day care, identification number is 36-0987654. 4,375 was paid.

mr. warden operated interiors unlimited selling home furnishings at retail as a sole proprietorship. his employer identification number is 36-1234567. the business code is 442200. mr. warden maintains an inventory and used the accrual method of accounting for his sales and purchases. total receipts of the business were 158,262 and returns and allowances were 1,500. the gaap books showed the following information:

inventory at 1/1/07 35,000 insurance 1,450
purchases 70,000 utilities 1,200
inventory at 12/31/07 22,000 advertising 1,973
truck expenses 675 legal fees 600
other interest 300 office exp 375
rent (property) 8,400 depreciation 8,650
repairs 325 travel 525
taxes 1,750 meals and entertain 1,430
wages 15,305

on january 10, 2007, mr. warden purchased office furniture for 7,000. he elects to expense 3,000 under sec 179

on july 15, 2007, mr. warden purchased a pickup for use in the business. it was driven 8,000 miles, 100% business. it cost 42,000. it is considered a light, general-purpose truck. luxury auto rules not applicable to this vehicle.

in 2003, mr. warden purchased fixtures for the store for 7,346.

mr. warden bought a brick building on july 1, 1996, 87,000 being allocated to the building.

prepare a 2007 form 1040 along with any required schedules needed. you may ignore any state income tax returns as well as the alternative minimum tax
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