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Sheldon and Victoria are married and live in Ireland.

Sheldon is a U.S. citizen and has a valid Social Securitynumber. Victoria is a citizen of Ireland.

Victoria does not want to be treated as a resident alien forU.S. tax filing purposes. She has never filed a joint return withSheldon.

Sheldon worked for a U.S.-based company and earned $65,000.Victoria worked part-time and earned the equivalent of $15,000 inU.S. dollars.

Sheldon and Victoria’s daughter, Riley, lives with them. Rileyis two years old, a U.S. citizen, and has a valid Social Securitynumber.

Victoria has another child from a previous marriage; Adam is 10years old and is a citizen of Ireland. Sheldon has not adoptedAdam.

Sheldon and Victoria provided all the financial support forRiley and Adam.

. Can Sheldon claim Riley as a dependent?
A. Yes, Riley is his qualifying child.
B. Yes, Riley is his qualifying relative.
C. No, Riley lives outside the U.S., Canada, or Mexico.
D. No, because Victoria will not file a joint return with him,Sheldon cannot claim any dependents.

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Jarrod Robel
Jarrod RobelLv2
29 Sep 2019

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Joseph P. Smith and his wife Gladys G. Smith are married andfile a joint return for 2015. Joseph’s social security number is499-99-4321 and he is 44 years old. Gladys social security numberis 637-44-9876 and she is 43 years old. They live at 1502 SeamanCourt,

Flemington, NJ 08822.

Mr. Smith is a pharmacist and he took 6 months off to care for asick relative in 2015.

His form W-2 from the Flemington Pharmacy showed thefollowing:

Wages $65,000

Withholding(federal) 6,000

The Smiths have a 17-year old son, Jackson, who is enrolled inthe eleventh grade at Flemington Perpetual Catholic School.Jackson’s social security number is 669-90-0099. The Smiths alsohave an 18-year old daughter, Lois, who is a part-time freshman atOceanside Community College (OCC). Lois’s social security number is669-90-0100, and she is married to Larry Loser (social securitynumber 664-66-6688) who is 19 years old and also a part-timestudent at OCC. Lois and Larry have a 1-year old son, Lucky Loser(social security number 664-66-6689). Lois, Larry and Lucky live inan apartment up the street from Joseph and Gladys. Lois and Larrywork part-time and earned a combined $8500 in 2015; Joseph andGladys pay the rent on the apartment as well as the majority ofother expenses for Lois, Larry and Lucky.

Joseph and Gladys have the following investment income for2015:

Interest from the Trustworthy Savings Bank $380

Dividends (qualified) Seaside Bankstock 900

Dividends (qualified) Seaside Gas Companystock 490

Dividends (non-qualified) Hot Mutual Fund 145

Interest on NJ State MunicipalBonds 700

Interest on Seaside Electric CompanyBonds 675

Joseph went to the local casino and won $4800 playing the slotmachines. This was the only time he gambled during the year, andspent (lost) $1550 that day.

One of Gladys friends died during the year and Gladys received$50,000 in life insurance proceeds.

In July, Joseph’s aunt died and left him a piece of real estate(undeveloped land) worth $65,000.

Five years ago, Joseph and Gladys were divorced. Joseph marriedSuzy Sunshine, but the marriage did not work out and they weredivorced a year later. They had a child while married, SaraSunshine (social security number 555-50-5588, age 7). Under thedivorce decree, Joseph has to pay Suzy $12,600 per year until Sarareaches age 18 at which time the payment is reduced to $6000 peryear. Three years ago, Joseph and Gladys were remarried.

Flemington Pharmacy pays Joseph’s license fees and membershipdues to pharmaceutical organizations. During 2015 FlemingtonPharmacy paid $1550 for these fees and dues.

Gladys was laid off from her job on January 2, 2015 and receivedunemployment compensation of $4255 during 2015.

Joseph and his family are covered under a health insurance planprovided by the Flemington Pharmacy. Flemington pays $700 per monthand Joseph pays $100 per month for this plan. During the year,Gladys had an emergency appendectomy; the total bill was $10,500,the insurance covered $8600 and Joseph and Gladys paid theremainder.

On September 1, 2015 Gladys opened a store specializing inmedical appliances and accessories. The name of the store isFlemington Medical Appliances and is located at 1204 Main Street,Flemington, NJ 08822. The store uses the cash method of accountingand is operated as a sole proprietorship. Her income and expensesfor the year are as follows:

Sales ofmerchandise $63,400

Inventory, September 1 (purchased inAugust) 40,100

Inventory, December31 38,100

Purchases during theyear 37,800

Sales returns andallowances 600

Storerental 7,500

Officeexpense 1,380

Insurance 800

Advertising 3,100

Employeewages 3,350

Payroll and other businesstaxes 505

Interest on bank loan to openstore 2,760

Accountingfees 310

Utilities 992

Telephone 800

Maintenance 427

Miscellaneous 65

In addition to the above items, Gladys incurred travel expensesto attend a seminar on medical appliances and accessories. Shespent $500 on airfare, $750 on lodging, $225 on a rental car, and$360 on meals. Gladys has documentation for these expenses.

Gladys drove her 2012 Land Rover 2,845 miles for businessrelated purposes, and the vehicle was driven a total of 8,646 milesduring the year. Included in the 8,646 miles is 1040 milescommuting to the store. Gladys uses the standard mileage rates andhas substantiation for the mileage.

In July, Joseph loaned a fried $7,000 to purchase a car. Hisfriend lost his job in 2015 and stopped making payments on theloan. He plans to start making payments again, however, withadditional interest as soon as he has new employment.

Joseph and Gladys paid the following in 2015 (all by check orcan otherwise be substantiated):

Contributions to Flemington Perpetual CatholicChurch $410

Tuition to the Flemington Perpetual Catholic School (forJackson) 6,000

Clothes to the Salvation Army (10 bags in goodcondition) 275

Contributions to George Kerry’s Congressionalcampaign 250

Psychotherapy forGladys 2,000

Eyeglasses forJackson 375

Prescription medication anddrugs 1,850

Credit cardinterest 1,345

Interest on Joseph’s studentloans 3,125

Investment interest on stock marginaccount 345

Auto loan interest (paid for by home equity loan onresidence) 900

Autoinsurance 1,600

Dave Deduction, CPA, for preparation of last year’s taxreturn 700

Safe deposit rental for storage of stocks and taxdata 100

Contribution to educational savings account forJackson 1,000

Home mortgageinterest 10,910

Home property (real estate)taxes 8,400

Unreimbursed business expense (seminar onpharmaceuticals) 700

In June, Joseph purchased a new professional digital SLR camerafor $6,980. While the Smiths were on vacation in August, someonebroke into their residence and stole the camera. Joseph’shomeowner’s insurance did not reimburse him for any part of theloss since he declined the special premium add-on for high valueitems required by his policy.

Joseph’s grandfather died and left a portfolio of municipalbonds. In 2015 Joseph received $80,000 in tax-free interest (ignoreAMT tax calculations).

On November 14, Gladys purchased the building where her store islocated. She paid $230,000 for the building and $100,000 for theland the building is located on. Gladys store is the only businessin the building.

Joseph owned 1,000 shares of Really Huge Airline stock with abasis of $30 per share. The stock was purchased six years ago onJune 10. Joseph sells 500 shares of Really Huge Airline stock tohis uncle Geovanni and 500 shares to his sister Pristine for $5 pershare on December 31, 2015. The market price of Really Huge Airlinestock on December 31, 2015 was $35 per share.

Joseph sold the following securities during the year andreceived a 1099-B that showed the following information:

Security Description Purchased Sold Selling Price Adjusted Basis

OrangeInc. 100 shares 02/11/97 04/16/15 $3,080 $2,150

Blue,Inc. 100 shares 07/17/01 07/31/15 $2,000 $4,210

Red (Preferred) 100 shares 12/08/14 09/25/2015 $8,975 $10,510

Plum(Bonds) due 4/2015 12/30/05 01/02/2015 $5,155 $5,320

Peach Mutual Fund 5,010 shares05/30/06 10/22/2015 $60,120 $56,480

The selling price is net of sales commissions. In addition tothe above amounts, the Hot Mutual Fund distributed a long-termcapital gain of $450 on December 30, 2015.

Joseph purchased 5 acres of raw land in Speculator, NY, 10 yearsago. His basis in the land was $90,000. On August 1, 2015 he soldthe land for $150,000 on the installment method. Joseph received$52,500 in the year of the sale, and the balance was payable at$9,750 per year for the next 10 years plus a market rate ofinterest.

On May 15, 2105 Joseph and Gladys sold their personal residencefor $585,150 and purchased a new house for $725,000. They had ownedthe old house for 20 years and it had an adjusted basis of $35,075.The house had been their personal residence for all the years theywere married. They moved into the new house on May 18, 2015.

To do:

Using the information above, complete the 1040 form for Josephand Gladys including all additional forms and schedules. You mayuse tax software or can access the required forms on the IRS.govwebsite.

Joseph P. Smith and his wife Gladys G. Smith are married andfile a joint return for 2015. Joseph’s social security number is499-99-4321 and he is 44 years old. Gladys social security numberis 637-44-9876 and she is 43 years old. They live at 1502 SeamanCourt, Flemington, NJ 08822.

Mr. Smith is a pharmacist and he took 6 months off to care for asick relative in 2015.

His form W-2 from the Flemington Pharmacy showed thefollowing:

Wages $65,000

Withholding(federal) 6,000

The Smiths have a 17-year old son, Jackson, who is enrolled inthe eleventh grade at Flemington Perpetual Catholic School.Jackson’s social security number is 669-90-0099. The Smiths alsohave an 18-year old daughter, Lois, who is a part-time freshman atOceanside Community College (OCC). Lois’s social security number is669-90-0100, and she is married to Larry Loser (social securitynumber 664-66-6688) who is 19 years old and also a part-timestudent at OCC. Lois and Larry have a 1-year old son, Lucky Loser(social security number 664-66-6689). Lois, Larry and Lucky live inan apartment up the street from Joseph and Gladys. Lois and Larrywork part-time and earned a combined $8500 in 2015; Joseph andGladys pay the rent on the apartment as well as the majority ofother expenses for Lois, Larry and Lucky.

Joseph and Gladys have the following investment income for2015:

Interest from the Trustworthy Savings Bank $380

Dividends (qualified) Seaside Bankstock 900

Dividends (qualified) Seaside Gas Companystock 490

Dividends (non-qualified) Hot Mutual Fund 145

Interest on NJ State MunicipalBonds 700

Interest on Seaside Electric CompanyBonds 675

Joseph went to the local casino and won $4800 playing the slotmachines. This was the only time he gambled during the year, andspent (lost) $1550 that day.

One of Gladys friends died during the year and Gladys received$50,000 in life insurance proceeds.

In July, Joseph’s aunt died and left him a piece of real estate(undeveloped land) worth $65,000.

Five years ago, Joseph and Gladys were divorced. Joseph marriedSuzy Sunshine, but the marriage did not work out and they weredivorced a year later. They had a child while married, SaraSunshine (social security number 555-50-5588, age 7). Under thedivorce decree, Joseph has to pay Suzy $12,600 per year until Sarareaches age 18 at which time the payment is reduced to $6000 peryear. Three years ago, Joseph and Gladys were remarried.

Flemington Pharmacy pays Joseph’s license fees and membershipdues to pharmaceutical organizations. During 2015 FlemingtonPharmacy paid $1550 for these fees and dues.

Gladys was laid off from her job on January 2, 2015 and receivedunemployment compensation of $4255 during 2015.

Joseph and his family are covered under a health insurance planprovided by the Flemington Pharmacy. Flemington pays $700 per monthand Joseph pays $100 per month for this plan. During the year,Gladys had an emergency appendectomy; the total bill was $10,500,the insurance covered $8600 and Joseph and Gladys paid theremainder.

On September 1, 2015 Gladys opened a store specializing inmedical appliances and accessories. The name of the store isFlemington Medical Appliances and is located at 1204 Main Street,Flemington, NJ 08822. The store uses the cash method of accountingand is operated as a sole proprietorship. Her income and expensesfor the year are as follows:

Sales ofmerchandise $63,400

Inventory, September 1 (purchased inAugust) 40,100

Inventory, December31 38,100

Purchases during theyear 37,800

Sales returns andallowances 600

Storerental 7,500

Officeexpense 1,380

Insurance 800

Advertising 3,100

Employeewages 3,350

Payroll and other businesstaxes 505

Interest on bank loan to openstore 2,760

Accountingfees 310

Utilities 992

Telephone 800

Maintenance 427

Miscellaneous 65

In addition to the above items, Gladys incurred travel expensesto attend a seminar on medical appliances and accessories. Shespent $500 on airfare, $750 on lodging, $225 on a rental car, and$360 on meals. Gladys has documentation for these expenses.

Gladys drove her 2012 Land Rover 2,845 miles for businessrelated purposes, and the vehicle was driven a total of 8,646 milesduring the year. Included in the 8,646 miles is 1040 milescommuting to the store. Gladys uses the standard mileage rates andhas substantiation for the mileage.

In July, Joseph loaned a fried $7,000 to purchase a car. Hisfriend lost his job in 2015 and stopped making payments on theloan. He plans to start making payments again, however, withadditional interest as soon as he has new employment.

Joseph and Gladys paid the following in 2015 (all by check orcan otherwise be substantiated):

Contributions to Flemington Perpetual CatholicChurch $410

Tuition to the Flemington Perpetual Catholic School (forJackson) 6,000

Clothes to the Salvation Army (10 bags in goodcondition) 275

Contributions to George Kerry’s Congressionalcampaign 250

Psychotherapy forGladys 2,000

Eyeglasses forJackson 375

Prescription medication anddrugs 1,850

Credit cardinterest 1,345

Interest on Joseph’s studentloans 3,125

Investment interest on stock marginaccount 345

Auto loan interest (paid for by home equity loan onresidence) 900

Autoinsurance 1,600

Dave Deduction, CPA, for preparation of last year’s taxreturn 700

Safe deposit rental for storage of stocks and taxdata 100

Contribution to educational savings account forJackson 1,000

Home mortgageinterest 10,910

Home property (real estate)taxes 8,400

Unreimbursed business expense (seminar onpharmaceuticals) 700

In June, Joseph purchased a new professional digital SLR camerafor $6,980. While the Smiths were on vacation in August, someonebroke into their residence and stole the camera. Joseph’shomeowner’s insurance did not reimburse him for any part of theloss since he declined the special premium add-on for high valueitems required by his policy.

Joseph’s grandfather died and left a portfolio of municipalbonds. In 2015 Joseph received $80,000 in tax-free interest (ignoreAMT tax calculations).

On November 14, Gladys purchased the building where her store islocated. She paid $230,000 for the building and $100,000 for theland the building is located on. Gladys store is the only businessin the building.

Joseph owned 1,000 shares of Really Huge Airline stock with abasis of $30 per share. The stock was purchased six years ago onJune 10. Joseph sells 500 shares of Really Huge Airline stock tohis uncle Geovanni and 500 shares to his sister Pristine for $5 pershare on December 31, 2015. The market price of Really Huge Airlinestock on December 31, 2015 was $35 per share.

Joseph sold the following securities during the year andreceived a 1099-B that showed the following information:

Security Description Purchased Sold Selling Price Adjusted Basis

OrangeInc. 100 shares 02/11/97 04/16/15 $3,080 $2,150

Blue,Inc. 100 shares 07/17/01 07/31/15 $2,000 $4,210

Red (Preferred) 100 shares 12/08/14 09/25/2015 $8,975 $10,510

Plum(Bonds) due 4/2015 12/30/05 01/02/2015 $5,155 $5,320

Peach Mutual Fund 5,010 shares05/30/06 10/22/2015 $60,120 $56,480

The selling price is net of sales commissions. In addition tothe above amounts, the Hot Mutual Fund distributed a long-termcapital gain of $450 on December 30, 2015.

Joseph purchased 5 acres of raw land in Speculator, NY, 10 yearsago. His basis in the land was $90,000. On August 1, 2015 he soldthe land for $150,000 on the installment method. Joseph received$52,500 in the year of the sale, and the balance was payable at$9,750 per year for the next 10 years plus a market rate ofinterest.

On May 15, 2105 Joseph and Gladys sold their personal residencefor $585,150 and purchased a new house for $725,000. They had ownedthe old house for 20 years and it had an adjusted basis of $35,075.The house had been their personal residence for all the years theywere married. They moved into the new house on May 18, 2015.

To do:

Using the information above, complete the 1040 form for Josephand Gladys including all additional forms and schedules. You mayuse tax software or can access the required forms on the IRS.govwebsite.

Please show Schedules and forms.

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