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Mike is 45 and made $36,000 in wages in 2016. He is single andpays all the cost of keeping up his home. Mike's daughter,Brittany, lived with Mike all year. Brittany's son, Hayden, wasborn in November 2016. Hayden lived in Mike's home since birth.Brittany is 18, single, and had $1,700 in wages in 2016. Mikeprovides more than half of the support for both Brittany andHayden. Mike, Brittany, and Hayden are all U.S. citizens with validSocial Security numbers. Mike and Hayden had health insurance thatqualified as minimum essential coverage. Brittany did not havehealth insurance at all in 2016.

1. Who can Mike claim as a qualifying child(ren) for the earnedincome credit?

A. Mike has no qualifying children.

B. Mike can claim Brittany, but not Hayden.

C. Mike can claim Hayden, but not Brittany.

D. Mike can claim both Brittany and Hayden.

2. Brittany did not have health insurance at all in 2016. Howdoes this affect Mike’s return?

A. There is no effect because Mike cannot claim Brittany as adependent.

B. Mike must claim a coverage exemption for Brittany or make ashared responsibility payment.

C. It does not affect Mike’s return. Brittany will have to claima coverage exemption or make the shared responsibility payment onher own return.

D. It doesn’t affect Mike’s return because Brittany is 18 yearsold.

is it C and C? or could you explain please

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Jean Keeling
Jean KeelingLv2
29 Sep 2019

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Instructions:

Please complete the 2014 federal income tax return for JonathanHales. Be sure to include only required tax formswhen completing the tax return. Ignore the requirement to attachthe form(s) W-2 to the front page of the tax return. If requiredinformation is missing, use reasonable assumptions to fill in thegaps.

Jonathan Hales attended State University as a part-time studentduring the year. Jonathan lived at home with his parents whileworking a part-time job. The following information relates to 2014:• Jonathan’s Social Security number is 546-87-9435 • His mailingaddress is 123 Spring Lane, Willow, Texas 77521 • Jonathan is a U.S.citizen • Jonathan was single during the entire year • Jonathanturned 19 on July 1 • Jonathan does not have any children orprovide support for anyone but himself • Jonathan lived in a roomin the basement of his parents’ home for all 12 months of the year• For the year Jonathan’s parents provided $8,500 of supportincluding room and board, a car, health insurance, clothing,education, and car insurance. • Jonathan was included on hisfather’s qualified minimum health insurance coverage plan for all12 months during the year. Jonathan received the following incomeduring the year: Employer Gross Wages Federal Income TaxWithholding State Income Tax Withholding The Colony 2,475 0 0 RockClimbing, LLC 790 0 0 Community Pool, Inc. 4,235 175 0 Allapplicable and appropriate payroll taxes were withheld by hisvarious employers. Jonathan received $150 in interest income fromthe First Bank of Texas during the year. Jonathan did not own,control or manage any foreign bank accounts nor was he a grantor orbeneficiary of a foreign trust during the tax year. Jonathan had noitemized deductions. Jonathan does not want to contribute to thePresidential Election Campaign. He would like to receive a refund(if any) of any tax he may have overpaid for the year. Hispreferred method of receiving the refund is by check.

Your client Damien comes to see you in December 2016 asking toprepare his income tax return for the year ended 30 June 2016. Heis also seeking your taxation advice in relation to some otherissues. He provides the following information;

Damien inherited a single-storey house valued at $360,000 on 1December 1984 and lived in it as his main residence. On 1 September1989, Damien added a second storey of equal size to the house at acost of $190,000. He moved upstairs, since it had better views, andstarted to rent out the downstairs area to help pay off hismortgage.

Damien wants to sell the house and travel the world. He couldsell it now for $650,000, but he believes he could sell the housefor $720,000, provided he undertakes the following work to thehouse;

Replacing all the old floor coverings with tiles $4,800
Repainting the entire inside of the house $6,500
Building a carport as there is no car accommodation at present$10,400

Damien also received an insurance payout of $12,000 after amotorcycle accident coming home from work one day. He incurred$3,200 in medical costs and $3,000 in legal fees in relation to hisinjuries.

In addition to the above transactions, Damien had the followingincome and expenses for the year ended 30 June 2016;

Income

Salary (occupation – sales representative) $79,000

Entertainment allowance $2,000

Rental income from the house mentioned above $15,400

Franked dividends from Commonwealth Bank shares $2,106

Free flight received from Qantas Frequent Flyer Program$1,300

Expenditure

Meals incurred when entertaining clients in his job as a salesrepresentative for his employer $1,700

Purchase of work clothing and shoes $450

Costs of studying a management degree in order to obtain apromotion within The business he is employed $2,950

Train tickets for travelling to and from work $150

Rates and insurance on the house (this is the full amount)$2,400
Life insurance $180
Tax Agent fees $750
Damien’s PAYG Payment Summary shows PAYG withholdings for the year$18,800

REQUIRED:
Prepare a Letter of Advice to Damien thatoutlines/discusses/explains the following:

The tax implications of the expenditure on the house that hewants to undertake to improve the sale value.

The tax implications of the sale of the house,including anyexemptions available.Calculate the assessable gain, if any,assuming he does undertake the work to improve the sale value.

The tax implications of the insurance payout and medical costsincurred.Calculatethe assessable gain, if any.

The assessability and deductibility of all the other itemslisted in the information as you calculate Damien’s taxable incomefor the year ended 30 June 2016.

The taxpayable/(refundable) for Damien for the year ended 30June 2016, including all additional levies and tax offsets.

Important Note:

Damien is an astute taxpayer and questions every pieceof tax advice given to him. To ensure Damien is satisfied and youradvice will not be questioned in the future, you will need toprovide adequate (but concise) explanations about the income taxtreatment of all these items above.

As such, you will need to support all your discussionand interpretation with reference to legislation, cases or rulings.Referencing the Master Tax Guide will not be appropriate as this isnot the authority, but rather assists your understanding of thelegislation, cases and rulings. Also, copying entire sections oflegislation, cases or rulings will not be appropriate as Damienwants your advice provided in a way he can understand.

It may be necessary to make assumptions in the absenceof specific information that will be provided by Damien later, soyou may need to make a decision that moves in a particulardirection, but provide a brief explanation if another course ofaction is appropriate.

Your advice should be provided formally in aprofessional letter addressed directly to Damien (not an essayabout him), addressing each issue as necessary. Remember, quantitydoes not always equate to quality, so be concise in yourresponse.

Coastline CommunityCollege

Acct C103, IndividualTaxation

Summer 2018

Tax Year 2017 Form 1040Tax Return Project

Based upon Bill and Susan Minor’sinformation below, complete a Form 1040 for Tax Year 2017.

You will receive 10 points foreach correct figure you list on Lines 7, 8a, 12, 21, 37, 40, 42,43, 63, and 64.Email your completed Form 1040 to me by August 15,2018.

-In 2017, Bill and Susan Minor hadW-2 Wages totaling $99,000, Federal Tax Withheld of $9,000, andState Tax Withheld of $4,000.

-In 2017, Bill and Susan both hadhealth insurance for the entire year through their employers whichmet the Minimum Essential Coverage requirements under theAffordable Care Act.

-Bill is an auditor at a hotel andSusan is a high school business teacher.

-Bill and Susan will file MarriedFiling Joint in 2017.

-In 2017, Bill received interestincome of $250 from his 1st Bank of the Third BestAccount.He also cashed in a Certificate of Deposit early and thebank assessed a $25 penalty for early withdrawal of savings.

-In 2017, Bill and Susan spent $3,700making repairs on their home.The repairs included work on theirgarage door, replacement of the kitchen flooring, and refurbishingtheir electrical breaker box.

-The Minor’s took the StandardDeduction on their Form 1040 Tax Return in 2016.They don’t know ifthey can take the Standard Deduction or not in 2017.They want totake the largest deduction they can in 2017, whether that be theStandard Deduction OR the Itemized Deduction.

-In 2017, Susan received a $6,000inheritance from the estate of her great-great-grandmother.

-Susan and Bill are both 50 years oldand neither one is blind or disabled.

-Their grown children are Porsche andCarmen.The kids are out of the house and have their own jobs andapartments.Porsche, who made $96,000 in 2017, is a poor moneymanager and Bill gave her $3,800 in 2017.

-In 2017, Susan sent her Mom $1,500to help her Mom buy medication and medical devices.Susan does notand cannot claim her Mom as a Dependency Exemption.

-The Minor’s took fencing lessons in2017 that cost $2,400.They said these lessons help them “unwind”after a busy workday. Susan liked fencing so much she bought afoil, epee, and saber costing $2,200.A day after buying the fencingequipment, a thief broke into Susan’s fencing locker at the fencingcenter and stole the foil and saber worth $1,800.Susan filed apolice report, had no insurance on the foil and saber, and theproperty was not recovered.

-In 2017, Susan paid $850 in uniondues to the El Camino Real Teachers, Educators, and MentorsUnion.

-Bill owed the IRS $4,600 from his2015 Federal Income Tax Return.He is paying $212 amonth on this debt.In 2017, Bill calculated he paid $2,344 in taxand $200 in interest to the IRS.

-Susan helped her friend start abusiness.The friend plans on paying Susan $4,950 for all thework

she did.This payment will be made inDecember 2018.

-Susan decided in 2017 to become aself-employed tutor/teacher.She taught 2 kids business planningand

was paid $400.Her ONLY businessexpenses as a self-employed tutor/teacher were $50 for businesscards and $75 for paper, pencils, and supplies.Susan also tells youshe paid “Mystic Maria the World’s 7th Bestand Inexpensive Fortune Teller” $540 to predict Susan’ssuccess.Maria reported that Susan would be wildly successful in hertutoring/teaching business and would gross approximately $500 in2018.

-In 2017, Bill and Susan owned arental property and calculated Total Rental Real Estate Income onLine 26, Schedule E, of $6,820.

-In 2017, Bill won a $470 cash prizefor a contest he entered.Bill said he did NOT get a W-2 or a Form1099 for the $470 he won.

-The Minor’s received a State TaxRefund of $630 in April 2017 from the State of California.Thisrefund was for Tax Year 2016.

-Bill stated he contributed $2,000 tohis Roth IRA in 2017.

-Bill and Susan are members of theirlocal Elks Lodge, which is a non-profit organization, involved incharitable work, and a Qualifying Charitable Organization.TheMinor’s pay $140 a year for dues and their only activity with theElks is going to eat Sunday breakfast, attending dances, and buyingdrinks at the bar.

-The Minor’s paid $9,850 in HomeMortgage Interest in 2017.They paid a property tax bill of $3,700in 2017.

-In 2017, Bill drove his personal auto 3,900 miles as avolunteer meal deliverer for Let’s Feed All of the Hungry, aQualifying Charitable Organization.

-In 2017, Bill donated 150 hours of time to Goodwill, aQualifying Charitable Organization. He figures his time is worth$40 an hour.

-Susan has AB- blood type. When the Red Cross Bloodmobile stopsby her work, Susan donated blood. In 2017, she donated 6 pints ofblood. The local hospital charges $300 a pint for patients whoreceive AB- Blood.

-In 2017, Bill incurred $2,900 in gambling losses at Lost WagesCasino. In 2017, he won $4,100 in the California Super BigLotto.

-Bill and Susan calculated they had 6,000 commuting miles totheir W-2 jobs in 2017.

-The Minor’s donated $1,600 to Let’s Feed the Whales and Savethe Children Fund in 2017. Bill’s friend Dante said the fund was isa scam. Bill went on the IRS Website and found that the fund was aQualifying Charitable Organization.

- In 2017, Susan sold stock she had in The Coffee Grind Company.Susan’s friend, Alma Cabrera, an Enrolled Agent, and calculatedthat Susan had a Short-Term Capital Gain of $5,300 from the sale ofthe stock.

-In 2017, Susan decided to run for the city council. She paid a$255 filing fee and borrowed $15,000 from the local bank to financeher campaign. Susan lost the election.

-In 2017, Bill and Susan paid homeowner’s association dues of$1,400 on their personal residence.

-In 2017, Bill paid a dental bill of $7,500 for removal of 16 ofhis bad teeth and the filling of 16 of his other teeth.

In 2017, Bill paid $580 for DMV registration fees for his 2002Chevy S-10 Pickup Truck and Susan’s 2007 Yaris. Bill has determinedthese DMV fees are deductible on a Schedule A.

In 2017, Susan’s sister, who is a well-known, successful, andhighly paid entertainer, gave Susan a Tesla Model S Automobile witha Fair Market Value of $80,000. Susan uses the car to commute toher job and paid $900 in DMV registration fees that she hasdetermined are deductible on a Schedule A.

In 2017, Bill was ticketed for driving his car without a validregistration and no proof of insurance. He paid a fine of $350,which included court costs.

-In 2017, Susan found a gold and diamond ring near hear house.She turned it into the police department and after 30 days, thepolice gave the property back to Susan since no one claimed it. InNovember 2017, Susan had the ring appraised and found out the fairmarket value of this found property was $6,200.

-In 2017, Susan paid a researcher $300 to trace her familyhistory. The researcher reported to Susan she may be the rightfulowner of a small farm in Germany worth $1,000,000. Susan has madeplans to see if she owns the land, she has set aside $2,500 in asavings account for a title and legal search, and she will hire anattorney in December 2018 to determine her ownership rights.

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