Tax Return Example

File a tax return based on the following information:

John and Jill are married and under 40 years of age. John is employed as a store manager at Walmart, Inc. Jill owns and operates a food stand. Jill is a material participant in the business. She is a cash basis taxpayer. During 2019, John & Jill had the following income and expense items:

1. a. $140,000 salary from Walmart.
2. b. $32,000 cash gross receipts from her food stand.
3. c.Checks for $6,500 related to the food stand received on 12/31/19 deposited in the following year
4. d. $1,000 Interest income on City of Baltimore bonds
5. e. $70,000 life insurance proceeds on the death of her sister.
6. f. $23,000 check given to her by her wealthy aunt.
7. g. Inheritance on 1/1/19 – Stock with a FMV of 10,000 – Sold 1/23/19 for 45,000
8. h. $8,000 Damages for personal injury (car accident)
9. I. $25,600 medical expenses (unrelated to the car accident).
10. j.  $30,000 Bank loan (proceeds used to buy personal auto)
11. k. Paid expenses connected with the Food stand:
    1. - Rent 11,000
    2. -Supplies 6,400
    3. -Utilities & telephone 4,680
    4. -Wages 5,000
    5. -Penalties and Fines 3,500
    6. -Equipment rentals 8,000
    7. -Purchased/Placed in service - Office Furniture 6,500
12. l. $16,500 interest expense on a home mortgage (paid to San Jose Savings and Loan).
13. m. Student loan interest paid $2,400
14. n. Sold Stock – Proceeds = $29,000 – Cost - $11,000 Purchase date 01/01/12 sale date 04/01/19
15. o. Sold Stock – Proceeds = $4,000 – Cost - $17,000 Purchase date 01/01/19 sale date 04/01/19
16. p. Non-Business bad debt $3,500 – Loan date 01/12/11 – Bankruptcy 01/01/19
17. q. Alimony pre-2018 paid $10,000 to former wife SS # 432-96-5643.
18. r. Interest income of $4,500 from Money market account
19. s. Dividend Income of $5,500 from Google Stock
20. t. State taxes paid $6,500
21. u. Property taxes on the personal residence of $10,100.
22. v. Charitable contributions of $9,500.
23. w. IRA contribution $3,500
24. x. Prize $800
25. y. Worthless security purchased on 12/15/13 – determined worthless on 01/01/19 Cost basis 5,500
26. z. Stock – Cost Basis of $6,000 sold to their daughter for $1,000
27. aa. Land purchased on 1/1/12 with a Basis of 8,000,000 FMV of 10,000,000 sold on 1/1/19 in exchange for a property with an FMV of 9,000,000 and cash of 1,000,000
28. ab. Sale of personal residence lived in the home for past 10 years – basis in the home = 100,000 sold for 175,000