INDIVIDUAL TAX RETURN WITH SOLE PROPRIETORSHIP

Note that this example is for tax year 2015 because the 2016 tax forms have not yet been

released by the IRS.

Facts

William and June Spicer have two dependent children, Sophie age 9 and Carl age 7, both of

whom live at home. (Additional personal data are provided directly on Form 1040.) William

operates a gourmet market in Raleigh, Bill?s Market, as an accrual-basis sole proprietorship.

The information on gross market sales, expenses, and property transactions is the same as

provided for the regular corporate tax return (Sample Tax Return 1) except that William

receives no salary and there is no related FICA tax. This information is as follows:

The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000

when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August

15, 2015. The Market also sold a display case for $1,000 on December 12, 2015, that had cost

$12,000 when purchased on June 6, 2011; it had an adjusted basis of $4,000 when sold. The

gains or losses on these asset sales are the same for tax and financial accounting. The

business complies with all Form 1099 requirements.

William is also a 10 percent shareholder in Imagineers Corporation, an S corporation, but

takes no active role in the business. He received a Schedule K-1 from this S corporation

reporting $1,800 in ordinary business income. June is a general partner in The Bridal Shop

Partnership. She worked 3 days a week at the shop and received a Schedule K-1 reporting a

$12,000 guaranteed payment and $8,000 in ordinary business income. June paid $3,800 for

after-school and summer child care while she worked.

Gross sales ($1,300,000 from credit card sales) $2,700,000

Merchandise purchases 1,980,000

Expenses:

Advertising $40,000

Charitable contributions 2,000

Cleaning/maintenance 12,000

Depreciation (MACRS pre-2015 purchases) 3,000

Section 179 expense (2/1/15 display case) 5,000

Payroll taxes 18,000

Health insurance 15,000*

Insurance (excludes health) 18,000

Interest expense 1,000

Licenses/fees 4,000

Meals/entertainment 1,000

Office expenses 14,000

Rent 120,000

Salary/wages 210,000

Travel 8,000

Utilities 16,000

*Includes $3,000 for health insurance for William and his family.

The following information pertains to the completion of the Spicers? personal tax return:

Interest income $ 500

Dividend income (all qualified) 1,300

Unreimbursed doctor?s bills 8,000

Unreimbursed hospital bills 9,000

Dental bills 2,000

Mortgage interest 14,000

Real estate taxes 3,000

Contributions to their church 1,500

The Spicers sold 10,000 shares of ABC stock on February 2, 2015 for $4,000. They had

purchased the stock on August 1, 2008 for $18,000. During 2015, the Spicers paid $300 with

their 2014 North Carolina state income tax return and made $4,600 in estimated payments for

2015. This amount exceeds their alternate state sales tax deduction. June is a volunteer at the

children?s school two days a week tutoring at-risk students. Her total mileage for her trips to

and from the school was 1,200 miles. She also had unreimbursed out-of-pocket expenses for

teaching materials of $232. Additionally, the Spicers contribute $3,000 each to regular IRAs.

The Spicers made quarterly estimated tax payments of $17,500 each quarter. All payments

were made when due. Any refund that the Spicers have for 2015 is to be applied to their 2016

estimated taxes.

Form 1040 and Related Forms and Schedules

Form 1040: U.S. Individual Income Tax Return

Schedule A: Itemized Deductions

Schedule C: Profit or Loss from Business (Sole Proprietorship)

Schedule D: Capital Gains and Losses

Schedule E: Supplemental Income and Loss

Schedule SE: Self-Employment Tax (2)

Form 2441: Child and Dependent Care Expenses

Form 4562: Depreciation and Amortization

Form 4797: Sales of Business Property

Form 8582: Passive Activity Loss Limitations

Form 8949: Sales and Other Disposition of Capital Assets

The Spicers will prepare only one tax return, their Form 1040, along with all the required

schedules and forms including the Schedule C where the income and expenses for the

business are reported. A Form 4797 is completed for the business property dispositions; the

sale of the stock is entered on the Form 8949; the net gain on the equipment disposition and

the loss on the stock are both included on the Spicers? Schedule D. The $2,000 depreciation

recapture is also entered on Form 4797 but is transferred directly to the Spicers? Form 1040.

Two other items are not included on the Schedule C?the health insurance for William and

his family (which is deducted on page 1 of the Form 1040 as a deduction for AGI) and the

charitable contribution (which is included with the Spicers? personal charitable deductions on

their Schedule A). June is allowed to deduct 14 cents per mile for the 1,200 miles driven

($168) for her volunteer work along with her out-of-pocket expenses of $232.

Their total itemized deductions are $23,800 and their exemptions are $16,000 (4

$4,000). They are not able to benefit from the child tax credit as their AGI exceeds the

allowable limit for claiming all or part of this credit, but they are allowed a $760 credit for

June?s child care expenses. Their dividend income is taxed at 15 percent while the rest of the

income is taxed at the regular rates.

How do i apply NOL Taxes form ?

1045 Form Application for Tentative Refund a Type or print Department of the Treasury Internal Revenue Service Name(s) shown on return OMB No. 1545-0098 2015 Separate instructions and additional information are available at www.irs.gov/form1045. a Do not attach to your income tax return. Mail in a separate envelope. a For use by individuals, estates, or trusts. Social security or employer identification number Number, street, and apt. or suite no. If a P.O. box, see instructions. Spouse's social security number (SSN) City, town or post office, state, and ZIP code. If a foreign address, also complete spaces below (see instructions). Daytime phone number Foreign country name Foreign postal code 1 This application is filed to carry back: 2a Foreign province/county a Net operating loss (NOL) (Sch. A, line 25) $ b Unused general business credit $ $ b Date tax return was filed For the calendar year 2015, or other tax year beginning , 2015, and ending c Net section 1256 contracts loss , 20 3 If this application is for an unused credit created by another carryback, enter year of first carryback a 4 5 If you filed a joint return (or separate return) for some, but not all, of the tax years involved in figuring the carryback, list the years and specify whether joint (J) or separate (S) return for each a and b Year(s) a If SSN for carryback year is different from above, enter a SSN a 6 If you changed your accounting period, give date permission to change was granted a 7 Have you filed a petition in Tax Court for the year(s) to which the carryback is to be applied? 8 9 Yes No Is any part of the decrease in tax due to a loss or credit resulting from a reportable transaction required to be disclosed on Form 8886, Reportable Transaction Disclosure Statement? . . . . . . . . . . . . Yes No If you are carrying back an NOL or net section 1256 contracts loss, did this cause the release of foreign tax credits or the release of other credits due to the release of the foreign tax credit (see instructions)? . . . Yes No Computation of Decrease in Tax . . . . . preceding preceding preceding tax year ended a tax year ended a tax year ended a (see instructions) Before carryback Note: If 1a and 1c are blank, skip lines 10 through 15. 10 NOL deduction after carryback (see instructions) 11 Adjusted gross income . . . . 12 Deductions (see instructions) . . . 13 Subtract line 12 from line 11 . . . 14 Exemptions (see instructions) . . . 15 16 Taxable income. Line 13 minus line 14 Income tax. See instructions and attach an explanation . . . . . . Excess advance premium tax credit repayment (see instructions) . . . . 17 . 18 Alternative minimum tax . . . . . 19 Add lines 16 through 18 . . . . . After carryback Before carryback For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. After carryback Before carryback Cat. No. 10670A After carryback Form 1045 (2015) Page 2 Form 1045 (2015) Computation of Decrease in Tax preceding preceding preceding (Continued) tax year ended a Before carryback 20 General business credit (see instructions) 21 Net premium tax credit (see instructions) 22 Other credits. Identify . 23 Total credits. Add lines 20 through 22 24 Subtract line 23 from line 19 . 25 Self-employment tax (see instructions) 26 27 Additional medicare tax (see instructions) Net investment income tax (see instructions) . . . . . . . . . Health care: individual responsibility (see instructions) . . . . . . . 28 . . . . . . tax year ended a After carryback Before carryback tax year ended a After carryback . Other taxes . 30 31 Total tax. Add lines 24 through 29 . . Enter the amount from the \"After carryback\" column on line 30 for each year 32 Decrease in tax. Line 30 minus line 31 33 Overpayment of tax due to a claim of right adjustment under section 1341(b)(1) (attach computation) Keep a copy of this application for your records. . . . . . . . . Your signature Date Spouse's signature. If Form 1045 is filed jointly, both must sign. Date Print/Type preparer's name Paid Preparer Use Only . Under penalties of perjury, I declare that I have examined this application and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. F F Sign Here . After carryback . 29 . Before carryback Preparer's signature Date Check if self-employed Firm's name a Firm's EIN a Firm's address a Phone no. PTIN Form 1045 (2015) Page 3 Form 1045 (2015) Schedule ANOL (see instructions) 1 Enter the amount from your 2015 Form 1040, line 41, or Form 1040NR, line 39. Estates and trusts, enter taxable income increased by the total of the charitable deduction, income distribution deduction, and exemption amount (see instructions) . . . . . . . . . . . . . . . 2 3 4 5 Nonbusiness capital losses before limitation. Enter as a positive number Nonbusiness capital gains (without regard to any section 1202 exclusion) If line 2 is more than line 3, enter the difference. Otherwise, enter -0- . . If line 3 is more than line 2, enter the difference. Otherwise, enter -0- . . . . . . . . . 5 Nonbusiness deductions (see instructions) . . . . . . . . . . . Nonbusiness income other than capital gains (see instructions) . . . . . . . . . . . . 7 Add lines 5 and 7 . . . . . . . . . . . . . . . . . . . If line 6 is more than line 8, enter the difference. Otherwise, enter -0- . . If line 8 is more than line 6, enter the difference. Otherwise, enter -0-. But do not enter more than line 5 . . . . . . . . . . . . 10 Business capital losses before limitation. Enter as a positive number . . Business capital gains (without regard to any section 1202 exclusion) . . . . . . . . 12 Add lines 10 and 12 . . . . . . . . . . . . . . . . . . Subtract line 13 from line 11. If zero or less, enter -0- . . . . . . . Add lines 4 and 14 . . . . . . . . . . . . . . . . . . . 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 2 3 4 6 8 . . . . . . . 9 Section 1202 exclusion. Enter as a positive number . . . . . . . . . . . . Subtract line 17 from line 16. If zero or less, enter -0- . . . . . . . 18 Enter the loss, if any, from line 21 of your 2015 Schedule D (Form 1040). (Estates and trusts, enter the loss, if any, from line 20 of Schedule D (Form 1041).) Enter as a positive number . . . . . . . . . . . . . 19 If line 18 is more than line 19, enter the difference. Otherwise, enter -0- . 20 If line 19 is more than line 18, enter the difference. Otherwise, enter -0- . . . . . Subtract line 20 from line 15. If zero or less, enter -0- . . . . . . . . . . . Domestic production activities deduction from your 2015 Form 1040, line 35, or Form 34 (or included on Form 1041, line 15a) . . . . . . . . . . . . . . . . . . . . 17 . . line . 21 22 Enter the loss, if any, from line 16 of your 2015 Schedule D (Form 1040). (Estates and trusts, enter the loss, if any, from line 19, column (3), of Schedule D (Form 1041).) Enter as a positive number. If you do not have a loss on that line (and do not have a section 1202 exclusion), skip lines 16 through 21 and enter on line 22 the amount from line 15 . . . . . . . 11 13 14 15 16 . . . . . . 1040NR, . . . NOL deduction for losses from other years. Enter as a positive number . . . . . . . . . NOL. Combine lines 1, 9, 17, and 21 through 24. If the result is less than zero, enter it here and on page 1, line 1a. If the result is zero or more, you do not have an NOL . . . . . . . . . . 23 24 25 Form 1045 (2015) Page 4 Form 1045 (2015) Schedule BNOL Carryover (see instructions) Complete one column before going to the next column. Start with the earliest carryback year. 1 2 3 4 5 6 7 NOL deduction (see instructions). Enter as a positive number . . . 9 Modified taxable income. Combine lines 2 through 8. If zero or less, enter -0- . . . . . . . . . . . . 12 13 14 15 16 17 18 19 20 21 preceding tax year ended a tax year ended a tax year ended a Taxable income before 2015 NOL carryback (see instructions). Estates and trusts, increase this amount by the sum of the charitable deduction and income distribution deduction . . . Net capital loss deduction (see instructions) . . . . . . . . . Section 1202 exclusion. Enter as a positive number . . . . . . . . Domestic production activities deduction . . . . . . . . . Adjustment to adjusted gross income (see instructions) . . . . . . . Adjustment to itemized deductions (see instructions) . . . . . . . . . Individuals, enter deduction for exemptions (minus any amount on Form 8914, line 6, for 2006 and 2009; line 2 for 2005 and 2008). Estates and trusts, enter exemption amount . 11 preceding . 8 10 preceding NOL carryover (see instructions) . . Adjustment to Itemized Deductions (Individuals Only) Complete lines 11 through 38 for the carryback year(s) for which you itemized deductions only if line 3, 4, or 5 above is more than zero. Adjusted gross income before 2015 NOL carryback . . . . . . . . Add lines 3 through 6 above . . . Modified adjusted gross income. Add lines 11 and 12 . . . . . . . . Medical expenses from Sch. A (Form 1040), line 4 (or as previously adjusted) Medical expenses from Sch. A (Form 1040), line 1 (or as previously adjusted) Multiply line 13 by percentage from Sch. A (Form 1040), line 3 . . . . Subtract line 16 from line 15. If zero or less, enter -0- . . . . . . . . Subtract line 17 from line 14 . . . . Mortgage insurance premiums from Sch. A (Form 1040), line 13 (or as previously adjusted) . . . . . . Refigured mortgage insurance premiums (see instructions) . . . . Subtract line 20 from line 19 . . . Form 1045 (2015) Page 5 Form 1045 (2015) Schedule BNOL Carryover (Continued) Complete one column before going to the next column. Start with the earliest carryback year. 22 Modified adjusted gross income from line 13 on page 4 of the form . . . 23 Enter as a positive number any NOL carryback from a year before 2015 that was deducted to figure line 11 on page 4 of the form . . . . . . . . . 24 25 Add lines 22 and 23 . . . . . . Charitable contributions from Sch. A (Form 1040), line 19 (line 18 for 2005 and 2006), or Sch. A (Form 1040NR), line 5 (line 7 for 2005 through 2010), or as previously adjusted Refigured charitable contributions (see instructions) . . . . . . . . . 26 27 28 Subtract line 26 from line 25 . . . Casualty and theft losses from Form 4684, line 18 (line 23 for 2008; line 21 for 2009; line 20 for 2005, 2006, and 2010) . . . . . . . . . . . 29 Casualty and theft losses from Form 4684, line 16 (line 21 for 2008; line 18 for 2005, 2006, and 2010; line 19 for 2009) 30 31 Multiply line 22 by 10% (.10) . . . Subtract line 30 from line 29. If zero or less, enter -0- . . . . . . . . 32 33 Subtract line 31 from line 28 . . . Miscellaneous itemized deductions from Sch. A (Form 1040), line 27 (line 26 for 2005 and 2006), or Sch. A (Form 1040NR), line 13 (line 15 for 2005 through 2010), or as previously adjusted 34 Miscellaneous itemized deductions from Sch. A (Form 1040), line 24 (line 23 for 2005 and 2006), or Sch. A (Form 1040NR), line 10 (line 12 for 2005 through 2010), or as previously adjusted 35 36 Multiply line 22 by 2% (.02) . . . . Subtract line 35 from line 34. If zero or less, enter -0- . . . . . . . . 37 Subtract line 36 from line 33 38 Complete the worksheet in the instructions if line 22 is more than the applicable amount shown in the instructions. Otherwise, combine lines 18, 21, 27, 32, and 37; enter the result here and on line 7 (page 4) . . . . . . preceding preceding preceding tax year ended a tax year ended a tax year ended a . Form 1045 (2015)