Your clients, the Clinton family, came to your office on the 3rd of March 2019 and supplied you… 1 answer below »

Could someone please help me with the following income tax problem? An income tax form must be completed.A step by step walkthrough would be appreciated. Here is the problem:

Your clients, the Clinton family, came to your office on the 3rd of March 2019 and supplied you with the following information for you to prepare their 2018 tax returns.

Evader O. Clinton and husband, Avoider, have 3 children, A, B, and C. SSN for Evader and husband are 223-45-6779 and 234-56-6789 and children, 345-66-8999, 437-78-9101, and 423-81-1616. They all live at 1040 Lane, CP 2000, Pa. 18400. The ages of the children are 7, 9, and 20. C is the 20 year old and is a full time college student.

Avoider is an engineer whose W-2 shows income of $80,000, federal income tax withholding of $8,150, state tax withholding of $2,250. Medical insurance of $19,000 was paid on his behalf and covered the whole family. His contribution was $3,500.

The Clinton’s Real Estate tax and mortgage interests were $5,300 and $4,000. They have interest and dividend income as follows:

Interest: Savings Account: $200

Scranton School District Bonds: $200

Dividends: Total $2,135 of which all are qualifying except $176 from foreign companies from which foreign taxes are paid of $17.

Evader has a Women’s Clothing store, “Evaders”, EIN 22-2456789 in a strip mall. However, she moved her business from her own building to a rented location during 2018.

She has sales of $300,000

Expenses incurred for clothing store:

Auto $3,600 driven 11,000 miles, all business, diary kept.

Insurance: $5,400

Mortgage Interest: $4,400

Vehicle Leases—3rd year: $4,800–MSRP Price of $55,000

Real Estate Taxes Paid: $6,300

Rent paid: $8,500

Meals and Ent.: $1,900 entertainment portion is $300

Utilities: $6,600

Wages: $26,000–None eligible for credit

Moving Expense: $8,500

Professional Fees: $2,600

Office Expense: $1,200

Advertising: $7,500

Her beginning inventory was $100,000 and ending $ 32,500. The store purchased $185,000 worth of merchandise.

She moved into her new location on 3/7/2018.

The old building was sold on 6/17/18 for $83,100. The in service date was 10/15/2012. Only MARCS depreciation was taken. Cost was allocated $17,000 land and $105,000 for building. $17,200 of the selling price was allocated to land.

She had equipment, with a 7 year life, which she sold with the building, put in service 10/15/2012, for $7,500. Selling price was $2,100. No election on depreciation was made.

He paid a monthly check to his ex for $775 of which $356 is child support. The balance is not part of the property settlement. The ex’s Social Security number is 188-88-8888.

He owned residential rental property. Cost basis land is $15,090, building $195,800.

Date acquired was 11/5/2003 and sold on 11/5/2008, selling price $210,000 allocated between the land 20% and the balance to the building.

There are no prior year’s suspended losses.

The Clinton’s had unrecaptured 1231 losses of $10,000.

When Evader moved the store, she purchased $3,000 of new equipment of which she allocated $1,800 to a sec. 179 deduction. No other election was made.

The Clinton’s paid tuition of $10,300 for their daughter. The two sons had no tax related expenses.

Estimated federal taxes paid $4,000/Quarter. Last year’s tax liability was $14,365.

The Clinton’s had stock transactions as follows:

KL: purchased 4/12/2018 for $2,050, sold 5/10/2018 for $1,475.

GH: purchased 1/3/2001 for $2,650, sold 6/3/2018 for $2675.

The rental property had 7 year assets purchased used, costing $2,735, installed June 12, 2014. MACRS depreciation was used, no bonus depreciation was taken for these assets. These were the only assets put in service this year. These assets went with the property when it was sold. The sale price was $1,563.

Avoider’s apartment income was $18,000 with expenses for insurance $1,000 repairs, $300, taxes $2,700, utilities $1,500, interest $12,200, and supplies $230.

C, the daughter, has a W-2 showing earnings of $6,450, and federal tax withheld of $32.

Qualified business income—Taxable income limit applies. The qualifying income is too large.

The following forms should be used:

1040, Schedule 1, 2, 3, 4, 5, A, B, C, D, E, SE, form 4562 one for each business mentioned, form 4797, form 8863, form 8867, form 8949, 1250 gain form, form 8960

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