Using TaxCut® or other tax preparation software, and Prentice Hall's Federal Taxation 2010
Dave Stevens, age 34, is a self-employed physical therapist. His wife Sarah, age 31,
teaches English as a Second Language at a local language school.
Dave's Social Security number is 417-46-9403. Sarah's Social Security number is 528-95-6271. Sarah and Dave
have three children Andrew, age 8; Isaac, age 6; and Mira, age 3. The children's Social
Security numbers are, respectively, 377-83-2836, 377-64-7283, and 377-17-1415.
They live at 12637 Pheasant Run, West Bend, Oregon 74658. They paid $8,900 in qualified
residence interest and $2,400 in property taxes on their home. They had cash charitable
contributions of $14,000. They also paid $180 to a CPA for preparing their federal and
state income tax returns for the prior year, $100 of which was for the preparation of
Dave's Schedule C. Sarah and Dave earned interest on CDs of $3,200. Sarah's salary for
the year is $32,000, from which $9,600 in federal income tax and $1,400 in state income
taxes were withheld.
Dave's office is located at Suite 402, 942 Woodview Drive, Portland, Oregon 74624, and his employer ID number is 22-7584904. Dave has been practicing for four years, and he uses the cash method of accounting. During the current year,
Dave recorded the following items of income:
Revenue from patient visits $300,000
Interest earned on the office
checking balance 225
The following expenses were recorded on the office books:
Property taxes on the office $ 4,500
Mortgage interest on the office 12,000
Depreciation on the office 4,500
Malpractice insurance 37,500
Office staff salaries 51,000
Rent payments on equipment 15,000
Office magazine subscriptions 150
Office supplies 24,000
Medical journals 330
Dave pays $50 annually for use of a safety deposit box to store certain confidential documents related to his business. In addition to his medical practice, Dave spends 15 hours every week managing his real estate investments.
To make sure he is aware of all current investment strategies and best practices, he subscribes to the following journals:
Wall Street Journal $150
U.S. News & World Report 55
Money Magazine 45
Dave also paid $30,000 in estimated federal income taxes. Prepare Dave and Sarah's tax
return (Form 1040, Schedules A, B, C, and SE) for 2010.
Disregard any tax credits for which they may be eligible.
Attached is the completed tax return for Dave and Sarah. Please note the following points:
-I placed Dave's medical journals and business tax return ($100) under a miscellaneous ...
This solution provides the student with a completed tax return including notations on specific areas.