Larry and Lisa Williams, both 33 years old, have been married for 9 years. They live at 638 Arctic Way, Fairbanks, AK 99701. Lisa’s Social Security number is 445-81-1423 and Larry’s is 798-09-8526. Larry is the president of Arctic Birch Corporation located in Fairbanks. The Arctic Birch stock is owned 40 percent by Larry, 40 percent by Lisa, and 20

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Larry and Lisa Williams, both 33 years old, have been married for 9 years. They live at 638 Arctic Way, Fairbanks, AK 99701. Lisa’s Social Security number is 445-81-1423 and Larry’s is 798-09-8526. Larry is the president of Arctic Birch Corporation located in Fairbanks. The Arctic Birch stock is owned 40 percent by Larry, 40 percent by Lisa, and 20 percent by Larry’s father. Larry’s Arctic Birch wages and income tax withholding for 2014 are:

Earnings from Arctic Birch………………………….            $152,000

Federal tax withheld…………………………………                  10,000

State tax withheld……………………………………                            0

The Williams’ other income includes interest on a savings account at Alaska National Bank of $500. In April, Larry canceled a small certificate of deposit at Alaska National Bank and had to pay a $360 penalty on this early withdrawal of savings. During the year, Larry and Lisa paid the following amounts (all of which can be substantiated):

Home mortgage interest…………..……………………       $35,000

Real estate taxes on personal residence …………          5,600

Auto loan interest …………..………………………………          4,800

Medical insurance…………..………………………………           3,400

Other medical expenses…………..……………………             3,600

Income tax preparation fee…………..………………                 750

Charitable contributions:

A painting to the Fairbanks Museum of Arts for

exhibition (fair market value established by

qualified appraisal) …………..…………………………              40,000

Church…………..……………………………………………………         2,000

Tree Huggers Foundation (a qualified charity) ………      3,000

University of Alaska, Fairbanks…………..…………………        5,000

Safe-deposit box…………..………………………………………           300

The tax basis for the donated painting is $25,000 and the painting has been owned by Larry and Lisa for 5 years. During the year, Larry sold land to Arctic Birch Corporation for $75,000. He acquired the land 5 years ago for $160,000. No Form 1099-B was filed for this transaction. Arctic Birch Corporation does not have a qualified pension plan or Section 401(k) plan for its employees. Therefore, Larry deposited $11,000 ($5,500 each) into traditional IRA accounts for Lisa and himself.


Required:

Complete the Williams’ federal tax return for 2014. Use Form 1040, Schedule A, Schedule B, Schedule D, and Form 8949 from Pages 7-43 through 7-50 to complete this tax return. Make realistic assumptions about any missing data and ignore any alternative minimum tax. Do not complete Form 8283, which is used when large noncash donations are made to charity. Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Related Book For answer-question

Income Tax Fundamentals 2015

33rd Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven Gill

ISBN: 9781305177772