Comprehensive Problem 1 - Part 1: Taxpayer information, Form 1040, Schedules 1, 2, 3 and 4, Schedule

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Comprehensive Problem 1 - Part 1: Taxpayer information, Form 1040, Schedules 1, 2, 3 and 4, Schedule A, and Schedule B.

Noah and Joan Arc's Tax Return

Note: This problem is divided into three parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience.

Noah and Joan Arc live with their family in Dayton, OH. Noah’s Social Security number is 434-11-3311. Noah was born on February 22, 1983, and Joan was born on July 1, 1984. Both enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a firefighter for the city of Dayton.

1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-2345), born on March 21, 2011, and a daughter named Mary Sue (Social Security number 554-33-2411), born on December 3, 2014. They received a statement from Roundup Day Care Center (located on a separate tab) regarding the cost of child care provided for Mary Sue.

2. Joan and Noah brought a folder of tax documents (see Forms W-2 and 1098). In addition, they received a Substitute 1099 Statement from Charlotte Squab Financial Services (located on a separate tab) regarding their stock transactions for the year.

3. Noah’s pet store is located at 1415 S. Patterson Blvd, Dayton, OH 45409. The name of the store is ‘‘The Arc,’’ and its taxpayer identification number is 95-9876556. Since you handle Noah’s bookkeeping, you have printed the income statement from your Quickbooks software, shown in the table below:

The Ark 95-9876556 Income Statement For the Year Ended December 31, 2018
Revenue:
	Gross Sales		$143,000.00
	Less: Sales Returns and Allowances		$0.00
	Net Sales		$143,000.00
Cost of Goods Sold:
	Beginning Inventory	$10,000.00
	Add: Purchases	$62,000.00
		$72,000.00
	Less: Ending Inventory	$10,000.00
	Cost of Goods Sold		$62,000.00
	Gross Profit (Loss)		$81,000.00
Expenses:
	Dues and Subscriptions	$0.00
	Estimated Federal Tax Payments	$8,000.00
	Estimated State Tax Payments	$4,000.00
	Insurance	$780.00
	Meals and Entertainment	$1,256.00
	Miscellaneous	$0.00
	Payroll Taxes	$3,840.00
	Professional Fees	$1,700.00
	Rent	$8,400.00
	Travel	$1,200.00
	Utilities	$1,224.00
	Vehicle Expenses	$0.00
	Wages	$25,100.00
	Total Expenses		$55,500.00
	Net Operating Income		$25,500.00

4. Detail of The Arc's meals and entertainment:

$ 250	Food costs for Arc holiday party
400	Meals associated with business travel
50	Overtime meals for employees
556	Sports tickets for entertaining large customers
$1,256

5. Noah and Joan paid the following amounts during the year (all by check):

Political contributions	$250
Church donations (for which a written acknowledgment was received)	2,625
Real estate taxes on their home	2,375
Medical co-pays for doctor visits	700
Mortgage interest for purchase of home	See Form 1098
Tax return preparation fees	350
Credit card interest	220
Automobile insurance premiums	600
Uniforms for Joan	125

6. Noah has a long-term capital loss carryover from last year of $2,375.

7. Noah and Joan own rental property located at 16 Oakwood Ave, Unit A, Dayton, OH 45409. Noah provides the management services for the rental including selection of tenants, maintenance, repairs, rent collection, and other services as needed. It was rented for 365 days. The revenue and expenses for the year are as follows:

Rental income	$13,800
Insurance	575
Interest expense	6,870
Property taxes	1,000
Miscellaneous expenses	700
Depreciation (the house was acquired in 1993)	3,000

8. All members of the Arc household were covered for the entire year under health care insurance through Joan's employer.

9. The Arcs paid Ohio general sales tax of $976 during the year.

Required:
You are to prepare their federal income tax return in good form. You are not to complete an Ohio state income tax return. The following forms and schedules are required and may be found in parts 1, 2, or 3:

Part 1	Part 2	Part 3
Form 1040	Schedule C	Form 2441 (Only page 1 is required)
Schedule 1	Schedule D	Schedule E
Schedule 3	Schedule SE (Only page 1 is required)	Schedule 8812
Schedule 4	Form 8949	Child Tax Credit Worksheet
Schedule 5	Qualified Dividends and Capital Gain Tax Worksheet
Schedule A
Schedule B

Additional Instructions:

Click here to access the tax table to use for this problem.
Neither taxpayer wants to make a contribution to the presidential election campaign.
The taxpayers elect to use the foreign tax credit in lieu of the deduction.
Enter all amounts as positive numbers, except for a "loss." If required, enter a "loss" as a negative number on the tax form.
If an amount box does not require an entry or the answer is zero, enter "0".
If required, round your answers to the nearest dollar. On Schedule SE, use the rounded amounts in subsequent computations.
Make realistic assumptions about any missing data that you may need.