James A. Jones and his wife, Jean B. are Oklahoma residents for the 2015 tax year. Jean,

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Question:

James A. Jones and his wife, Jean B. are Oklahoma residents for the 2015 tax year. Jean, who was legally blind, passed away on June 5, 2015. Prepare a 2015 Individual Income Tax Return for the taxpayers.

Selected personal information:

	James	Jean

Date of Birth	January 31, 1945	July 4, 1961

Social Security Number	448-55-9998	448-55-9999

Presidential Election Campaign	No	No

Jean worked as a phone sales representative, and James lists his occupation “retired”.

James and Jean have a son Adam, 6/1/99, SS# 448-55-1122. Adam lived with them all year and attended school. He has no income to report.

Income and expenses as presented by James:

1. On July 15, 2015, James moved across the state of Oklahoma from Idabel, and meets both the distance and time tests requirements for deducting moving expenses. He drove his personal automobile 174 miles one way for the move and paid $12 in tolls while en route. He paid a moving company $1,490 to move his household goods from his old residence to the new residence.

2. James lists his current address as 200 N. University Dr., box 101, Edmond, OK 73034. His phone number is 405-974-2000.

3. James worked for Atlantic Coast Dining, Inc. in the dish room in Idabel, as a means of keeping busy until he decided to relocate for better employment opportunities for himself, and better education opportunities for Adam.

4. James’ W-2 (from Atlantic Coast) contained the following information: box 1 (wages) $13,234, box 2 (federal income tax withheld) $1,421, box 3 $15,234, box 4 $945, box 5 $15,234, box 6 $221, box 14 $2,000 (other), and box 17 (state income tax withheld) $610.

5. Jean worked for Institutional Operation Co. until she passed away. Her W-2 contained the

following information: boxes 1, 3 & 5 $7,324, box 2 $308, box 4 $454, box 6 $106 & box 17 $125.

6. James received a 1099-INT reporting $15,000 in interest income from the Bank of America, NA. Jean cashed a jointly owned US EE Savings Bond at the Bank of America on May 2nd. She had a basis of $50 in the bond and received a total of $105 in the transaction. James owned several municipal bonds issued by the City of Dallas. He received a 1099-INT reporting a total of $572 in interest income.

7. James received a 1099-DIV reporting $7,685 in qualified dividends from AT&T stock that he has owned for more than 20 years.

8. James cashed in on retirement savings as follows:

· Income from the Teachers’ Retirement System. His 1099-R reports a gross distribution of $13,867, with a taxable amount of $13,450. He had federal income tax withheld $750 and state income tax withhold of $561.

· He also received a 1099-R for a traditional IRA normal distribution showing a gross distribution of $8,175. He had federal income tax withheld of $428 and state income tax withheld of $49. The distribution code was 7.

9. The state sent James a 1099-G reporting a state income tax refund of $576 for 2015. James and Jean did itemize on their 2014 tax returns and deducted state income taxes paid. Their itemized deductions in 2014 totaled $18,900, including $2,020 for state income taxes.

10. James also received a SSA-1099. Box 5 reported $15,751 in total benefits with Medicare premiums of $1,062 and $170 withheld for federal income tax purposes. James also served as a juror for one day but was dismissed by the judge when word arrived at the courthouse that Jean had passed away. He received $75 for one day’s jury duty pay.

11. James sold the family home in Idabel (1021 S. Main, Idabel, OK 73046), before he moved for $575,000. James and Jean had paid $220,000 for the home in 1998 when they purchased it. They had made no capital improvements to the home, James then purchased a new home in Edmond for $275,000, closing on September 16, 2015. James and Adam rented the home prior to closing on it. They made rental payments for 2 months totaling $2,400.

12. After moving to his current residence, James established a neighborhood watch business for his neighborhood on August 1, 2015. His neighborhood association gave him a 1099-MISC reporting nonemployee compensation of $5,756 for “watch” services provided during 2015. He incurred the following expenses for his business endeavor: $672 in printing fees, $1,108 in supplies used, and $584 in telephone expenses. He also drove 1050 miles to carry out this activity patrol.

13. This sale below was reported to IRS only with proceeds price, no basis was determined by the broker.

· On May 1, 2015, Jean and James sold 25,600 shares of WMT common stock for $1,177,600. This was to help them pay some of the overwhelming medical bills. They paid a total of $2,460 in broker fees in the disposition of the stock. Jean originally purchased the stock on March 20, 1980. She bought 100 shares of WMT’s common stock for $3,175. Stock splits have been very profitable.

14. In trying to find a cure for Jean’s illness, the Jones’ undertook several experimental treatments. Unfortunately, many of them were not covered by insurance (the Jones’ had qualifying insurance coverage for all of them for 2015). After insurance paid its portion of their medical expenses, they still paid $15,752 for prescription medications, $65,682 in doctor’s bills, and $175,001 for hospital bills and $6,800 for family medical coverage. Of these expenses, $32,000 of doctor’s bills and $61,000 of hospital bills were incurred in conjunction with medical treatment undertaken in Mexico. They traveled 2,175 miles for medical purposed during 2015.

Writing assignment:James wants to know if the foreign medical items can be deductible on this return – research and using at least 3 different sources (one of which must be primary), explain why the foreign medical expenses may or may not be deductible. You may write this in a general memo format.

15. They paid $798 in property taxes on their joint Idabel primary residence, and then James incurred and paid $444 on his new Edmond residence after the move, made a cash contribution to their church of $125,282 and another cash contribution of $1,500 to the Indonesian Disaster Relief Fund in Nepal. They paid $430 during 2015 for the preparation of their 2013 income tax returns and $125 to rent a safety deposit box at a local bank for important papers including tax returns. Proper documentation exists for all of the above. James incurred investment advice expenses of $1,500.

16. To try and meet new people in Edmond, James attended an art class at the local university spending $1,272 for tuition and related fees and qualifying materials during the fall semester of 2015. He spent another $200 for books and supplies.

17. James and Jean made quarterly payments during 2015 that totaled $57,000 for federal and $19,500 for state taxes.

Other:

Assume that the tax return was prepared and filed on April 15, 2016.

Your assignment is to prepare the federal income tax return for the taxpayers as if you were their paid preparer. Unfortunately the only forms available as of today are generally 2014 tax forms. You may use those forms, but you must adapt the numbers to use that which will be present on 2015 tax returns (exemption amounts, standard deductions, mileage rates, etc.). The only form which you may deem necessary you do not need to complete is 2210. I do not need W-2’s, 1099’s etc. You cannot utilize any software to aid in the preparation of the tax return. Use of a software program will result in a grade of zero being awarded for the assignment. You may download and utilize any forms and worksheets available on the IRS’ website (www.irs.gov) (you will likely find the 1040 instruction booklet very helpful). You may utilize any publicly available resource for research on this assignment. Do not discuss your return with anyone else until after the due date, and you have turned the assignment in to your instructor.

The return must be prepared by hand. No type written forms will be grade. You must include the worksheets and show supporting documentation for your tax return calculations. You should show the form and line number on the calculation sheets. Use one sheet for each form (ie one for the 1040, one for Schedule A etc.) These sheets must also be hand written. For example – 1040 line 7 (x + y + z) = total reported on that line, or Schedule A, line 3 (a + b) = line total. If a line is a summary of several lines (for instance on 1040 line 22, where you add all the income items together for gross income) you do not need to write those amounts as a supporting calculation. If you do not provide the calculations for where numbers come from you will lose all of the points for that particular line on the assignment because I grade the calculation sheets on those items, not the line amount. The return needs to be assembled in proper IRS sequencing order. DO NOT include instruction sheets and forms that are blank – I don’t need them and you don’t want me wasting time going through them – it makes for an unhappy instructor.

You are to do a 2015 Federal tax return. Make sure that you are using the proper year amounts.

This assignment must be in a 3-ring binder (no larger than 1”). Put the assignment in the following order (with dividers for each section): Cover Page, Tax Return Problem, Tax Form and schedules, and then supporting documentation (and calculation sheets), IRS worksheets, Writing assignment. You must include the Tax Return Problem that has been assigned to you – if you give me someone else’s form then you will get an “F” in the course for academic dishonesty.