assignment is to produce a draft of the 1040 tax return and documentationSpring 2020
TAX CASE STUDY-Individual PROJECT
TAX YEAR 2019
Federal Return Only
Robert T. and Lisa J. Smith (ages 52 and 51) are married and live at 5678 Orange Blossom Trail, Dallas, TX 75248. Robert is the regional manager for a software company (SoftWare, INC), while Lisa is a self-employed CPA. They file a joint return and use the cash basis for tax purposes.
1. Robert receives a yearly salary of $99,000, plus an annual bonus, from Software INC. The annual bonus is determined in December of each year but not paid until January of the following year. Robert’s bonus is $50,000 for 2018 (received in 2019) and $66,000 for 2019 (received in 2020). Robert contributed $20,000 to the plan in 2018-and Software made a matching contribution of $10,000. The company provides an office for Robert’s use that is located at Suite 419, 101 Real Boulevard, Dallas, TX. (you need to determine what the total wages on Form W-2 will be based on the numbers noted above-do not calculate Medicare/social security payments.
2: Lisa is a licensed CPA in Texas who works part-time on a consulting basis. Her major clients are real estate developers (both residential and commercial). Because she limits her engagements, she does not have a separate office but does her work at the client’s premises or in her office at home (see item 4 below). Her business expenses for 2019 are summarized below:
CPA license fee $1,500
Subscriptions to professional journals $3,500
Dues to professional organizations— $1,250
10% relates to lobbying and PAC contributions
Purchase of a new computer for the office $5,000
Volunteer teacher at a local university-the fair market value
of the time that she spends is- $20,000
She would have been billing clients an equivalent amount
In addition, she drove the family Acura (purchased on June 7, 2016) 15,000 miles on her job assignments. Regarding the Acura, Lisa uses the automatic mileage method for tax deduction purposes. She drove the car for 25,000 miles during the year.
3. In addition to the above, the Smith’s had the following stock transactions during the year:
Stock Date Acquired Date Sold SalesPrice Purchase Price
150 sh Pfizer Corp 5/12/89 8/15/19 $5,000 $3,000
50 sh Allergan 6/10/18 10/23/19 $1,525 $1,800
25 sh ExxonMobil 4/28/18 9/4/19 $1,900 $2,700
60 sh Texaco 9/11/13 10/27/19 $11,410 $9,100
300 sh HulaHoop 1/7/16 12/1/19 $ 6,125 $3,150
4. On August 5, 2010, Robert purchased 3,000 shares of Groupon, Inc common stock for $20 a share as part of its initial public offering. By December 2019, the corporation ended its last game and its stock became worthless.
5. Besides the items previously noted, the Smith’s had the following receipts for 2019:
Lisa’s consulting income $120,000
City of Dallas bonds $25,000
Ford Motor Company bonds $19,000
Loan repayment by Sarah