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    Individual Income Tax with Schedules A, D, and E

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    1. Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year. They are both employed. Lyle and Kaye, ages 38 and 37, respectively, have combined salaries of $240,000, from which $42,000 of federal income tax and $10,000 of state income tax are withheld. Lyle and Kaye own two homes. Their primary residence is located at 11620 N. Mount Ave., New Haven, Connecticut 22222, and their vacation home is on the beach in Fort Lauderdale, Florida. They often rent their vacation home to supplement their income. The following items are related to the James' ownership of the two homes:

    Item New Haven Fort Lauderdale
    Rental income $ ? $15,000
    Qualified residence interest 7,200 5,000
    Property taxes 1,400 1,000
    Utilities 1,000 1,300
    Repairs 200 300
    Depreciation 0 3,500
    Advertising 0 200
    Insurance 1,500 1,500

    The James family used their Fort Lauderdale home 20 days during the year. They rented the vacation home 60 days during the year. Lyle and Kaye jointly purchase stock in various corporations and make the following transactions in the current year. (None of the stock qualifies as small business stock.)

    Date Transaction Price Paid/Sold
    2/15 Bought 50 shares of Lake common stock (they own no other Lake stock) $1,000
    5/14 Bought 100 shares of Bass common stock (they own no other Bass stock) 3,000
    5/24 Sold 25 shares of Lake common stock 250
    5/27 Bought 50 shares of Lake common stock 900
    Sold 50 shares of Bass common stock 1,750
    7/12 Bought 100 shares of Bass common stock 2,800

    The James' have no other income or expense items. Lyle and Kaye's Social Security numbers are 111-22-3333 and 444-55-6666, respectively. Jessica and Jerron's Social Security numbers are 123-45-6789 and 888-99-1010. The James' use the IRS method of allocating all expenses between personal and rental use.

    File the James' income tax return Form 1040, Schedules A, D, and E using the currently available forms and rates. Disregard any tax credits for which they may be eligible. Remit all forms in pdf.

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    Solution Preview

    The key points in this tax return are of course the schedule calculations. The schedules are A, D, and E. This would be a fairly common CPA firm type of tax return. The Lake stock transactions are churning so tightly that it makes it into a wash sale. The rental/vacation home is a point of research and paying attention to detail in the tax program. The tax program used is Turbotax 2005 there are some minor adjustments.

    Attached are a Word file and the tax return in pdf format.

    I have prepared this tax return in 2005 Turbotax. I suggest that you recalculate the adjustments.

    This tax return is a complex return in that there is an Alternative Minimum Tax that is added to the regular tax. Note that the income from salaries is substantial, but ...

    Solution Summary

    This solution contains an individual tax return for a family of four with a vaction property and stock transactions.