Paul and Elaine Smith are married. They have two children: John, a son, age 20, who is a full-time college student who earned $4,000 in wages from part-time work throughout the year; and a daughter, age 16, who is a high school student.

Paul’s salary for the year was $70,000. Elaine’s salary for the year was $54,000. In addition to those income items, they also had the following income items: Interest income on municipal bonds - $1,200; interest income on certificate of deposit (Chemical Bank) - $1,600; dividends on 4M (a domestic publicly traded corporation) stock - $1,400. Additionally, during the year, they sold 400 shares of Special Electric (SE) - a publicly traded corporation. The shares of stock were sold by the Smiths on August 31, 2015, for $6,000. The Smiths bought 100 shares of stock on July 1, 2014 $1,400 and 600 shares of stock on August 1, 2014 for $9,000. Also, the Smiths received a state income tax refund in the amount of $1,200 on April 30, 2015. The refund was for an overpayment of 2014 state income taxes. The Smiths filed a Form 1040A for 2014. Finally, Elaine Smith received alimony of $12,000 during the year.

The Smiths had the following expenditures during the year: Mortgage interest - $9,600; property taxes on home - $3,200; property taxes on auto - $600; credit card interest - $350; cash charitable contributions of $78; and a charitable contribution of a work of art (a portrait of former Mayor Linseed) worth $5,500 when donated to the Gotham Historical Society. The Smiths bought the painting five years earlier for $2,000.

Finally, Elaine Smith made and sold sculptures in her spare time. She did not have a separate bank account for the sculpture activity and did not advertise the activity. The activity started six years ago and has never been profitable. The sculpture activity is conducted in separate studio space that she owns. During the year, she sold three sculptures for a total of $1,700. She incurred the following expenses for the sculpting activity: mortgage interest on studio space - $800; property taxes on studio space - $500; supplies - $700; and depreciation - $400.

1. Which Source Documents are needed (Forms W-2,Forms 1099, itemized deduction information, and any other relevant documents) 

2. From this information, prepare an individual federal income tax return.
FEDERAL INCOME TAX I ? ACCT 237

Answer rating: 100% (QA)

Calculation of taxable income of Elain Smith Salary In... View the full answer