Topic: Federal Tax – Accounting
The assignment to complete is to use the introductory sentence about the tax payer and complete paragraph items: 1, 4,11,15, and 16. (see Below) Determine the forms to be completed. Note: Tax software to complete the project,using software to complete the project is optional and not required. The forms are provided in doc sharing for your use. However, students that desire to use the software to complete the project have the following options: H & R Block At Home: The software is included with the purchase of the hard copy of the textbook. You may use the software disk provided and follow the installation instructions. You may review the student companion website or contact the publisher’s customer service to obtain information regarding the purchase of the H&R Block At Home software online. If purchased and used to complete your project assignment, you will need to submit the file created by the software. • Save your work as an H&R Block At Home file. • Do NOT save the problem as a PDF file. TurboTax: If you purchased TurboTax and completed your assignment as a TurboTax file, you will need to submit your assignment as a PDF file before submitting it to your instructor • Indicate that you prepared the return at the bottom of page 2 of the Form 1040. Disregard the fact that the instructions say tax payer prepared Their own tax return. Alan B. and Paula R. Turner (ages 43 and 39) are married and live at 4603 Dogwood Lane, Raleigh, NC 27611. Alan is a chemist, employed by Old North Chemical Corporation, and Paula is a self-employed doctor of veterinary medicine. They use the cash basis for tax purposes. 1. Old North Chemical Corporation renders chemicals out of forest products and has several plants in the Carolinas and Georgia. Alan is the manager of the Raleigh facility at an annual salary of $90,000. Old North maintains a qualified defined contribution pension plan for its full-time employees, but Alan did not contribute to it in 2010. The company also has a health insurance plan—Alan’s contribution for 2010 is $4,000. (The plan covers the employee, spouse, and their dependent children.) Because of the increased risk associated with the type of business involved (i.e., processing of chemicals), Old North provides all of its employees with $200,000 of group term life insurance coverage. (See Table 4.3 in Chapter 4 of the text.) None of these items are included in Alan’s Form W-2.
4. Paula Turner is a licensed doctor of veterinary medicine with a specialty in exotic animals (e.g., reptiles, birds). Although she is considering starting her own practice (or buying an existing one), she is not sure the time is right in view of the depressed economy. For the time being, she enjoys working for other veterinarians on a contract basis. By doing this, she is making valuable contacts and benefiting from the experiences of fellow practitioners. For one of her major clients, the Raleigh SPCA, she bills her services at a discount rate. Paula uses her home as her business address. She keeps her records there and otherwise conducts business (e.g., accepts engagements and referrals and renders professional advice) on the premises. Since she does not maintain a specific area for exclusive business use, however, she does not claim an office in the home for tax purposes. Paula’s receipts from her practice during 2010 were $41,000, $6,000 of which was for services performed in 2009. Not included in these amounts is $7,500 she received in January 2011 for services rendered in December 2010.
11. Alan’s mother, Loretta, suffered a stroke on December 30, 2009, and died in the hospital on January 3, 2010. Part of Loretta’s medical expenses was covered by Medicare, but Alan absorbed the balance. On January 18, 2010, he paid the balance of $9,800, of which half was attributable to expenses incurred in 2009 and the rest in 2010. At the same time, Alan also paid the funeral expenses of $6,000. Although Loretta lived in her own house (see item 7 above), she has been properly claimed as a dependent of the Turners for the past few years.
15. The Turners’ household includes two dependent children: Ethan (age 14) and Ava (age 15), both of whom are full-time students. Relevant Social Security numbers appear below:
Name Social Security Number Birth Date Alan B. Turner 123–45–6785 07/14/1967 Paula R. Turner 123–45–6786 02/20/1971 Loretta Turner 123–45–6784 04/09/1938 Ethan Turner 123–45–6787 12/06/1996 Ava Turner 123–45–6788 07/29/1995 Paula’s professional activity code is 541940.
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