Tax Forms Required:
Form 1040
Schedule A
Schedule C
Schedule SE
Form 3903
You are not to use electronic tax software, such as Turbotax or Taxcut, to complete this assignment or the remaining tax return assignments. You may, however, in the interest of neatness, fill-in the forms directly from your computer (using Adobe software). Please ask me if you have any questions about this.
Problem Information:
John Bay, age 26 (Social Security Number 111-99-6666) is single and has no dependents. He is a self-employed sports consultant. His office is located in downtown Las Vegas at 225 Fremont Street, Zip Code 89101. He is a cash basis taxpayer. Bay lives at 1501 Chalcedony Drive, Las Vegas, Nevada 89113. Bay indicates that he wishes to contribute to the Presidential Election Campaign Fund. This is the first year he has itemized deductions since he did not previously own a home.
His sports consulting business had the following income and expenses during 2016.
Gross receipts $70,000
He received a 1914 Cracker Jack Joe Jackson baseball card (PSA 2) from a client for being particularly prescient about NFL game outcomes that the client bet on:
FMV of the card (Include on Schedule C in income area) 20,000
| Expenses of his consulting business: |
| Office lease payments (20b) 6,000 |
| Utilities 2,500 |
| Advertising 1,500 |
| Wages for assistant 15,000 |
| Payroll taxes for assistant 1,350 |
| Supplies (Put under office expense) 500 |
| Liability insurance 200 |
| Business license 50 |
| Fine for violating Nevada gaming laws 1,000 |
| Cost of entertaining clients 2,000 |
He attended a three-day seminar on “understanding point spreads” in Houston, Texas. All three days were business related. His costs were as follows:
| Airline fare $450 |
| Hotel (three nights) 550 |
| Taxi to and from airport 50 |
| Meals 150 |
At the start of the year, he moved from Portland, Oregon to Las Vegas, Nevada. Expenses related to the move were as follows:
| Miles of travel on the road (a direct route was taken) 1,250 miles |
| (Use 19 cents per mile) |
| Moving van company charges to move household goods $2,300 |
| Cost of lodging in route 160 |
| Cost of meals in route 95 |
| Motel charges in Las Vegas while waiting to move into purchased |
| house in Las Vegas 800 |
An examination of John’s personal financial records reveals the following:
| Gambling winnings from Blackjack $1,500 |
| Gambling losses from Blackjack 3,200 |
| Contributions to church 1,000 |
| CPA fees to prepare tax return (Allocate $300 to the Sch. C) 800 |
| Medical expenses (net of insurance reimbursement) 4,300 |
| Interest expense on home mortgage reported on Form 1098 8,350 |
| Property taxes on residence 2,400 |
| Property taxes on personal automobile 400 |
| Refund of 2015 Oregon state income taxes (Did not itemize in prior year) 400 |
| Sales taxes paid (based on actual receipts (higher than table amount) 952 |
He received $7,000 in alimony payments from his ex-wife, Janet.
He made timely quarterly federal income tax deposits for the year of $4,000 each quarter.
Assignment:
Prepare John’s 2016 federal income tax return. (Do not fill in the cents column)
