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ACCT 4410 Fundamentals Of Tax

tag 0 Download 3 Pages / 570 Words tag 18-06-2021


Gina and Mark Patterson are your clients and they have recently brought to you their income tax information for 2017.  They would like you to prepare their tax return for 2017.

The following basic information is provided to you:

  1. Mark and Gina use the cash method of accounting and file their tax return on a calendar-year basis.  
  2. Mark is 43 years old, birthdate 6/5/1974 and Gina is 38 years old, birthdate 3/19/1979.
  3. Mark’s social security number is 482-22-2020
  4. Gina’s social security number is 490-32-8090.
  5. Gina and Mark have two dependent children: Josh (16 years old), birthdate 7/3/2001 social security number 872-44-2929 and Julie (19 years old), birthdate 10/17/1998   social security number 798-88-3456.
  6. The couple has no foreign bank accounts.
  7. Mark and Gina do not wish to contribute to the presidential election campaign.
  8. Their home address is 1432 Howser Street, Santa Fe, Colorado 81252.
  9. Mark and Gina are married and want to file married filing jointly.  
  10. Mark runs an internet business, Handy Hints, from their home that provides handyman advice.  Mark has issued the required 1099s for his business.  

Details on the income and expenses from these activities are shown below:

Revenues $81,150

Home improvement conference registrations     4,500

Travel to conferences     1,250

Hotels        420

Meals        190

Accounting fees     1,200

DSL internet fees     1,850

Legal fees        625

Office supplies        240

Advertising on other sites     4,000

Phone ($10 per month for a separate phone

number for the office)        245

Mark began the business in October, 2015.  He uses a room in their home to operate his  business.   The room is 300 square feet of the 2,400 total square feet of the home.  The Pattersons incur the following expenses related to their home

Mortgage interest $7,000

Property taxes   2,200

Insurance      850

Gas and electric   1,600

Repairs and maintenance      400

Cable television      350

House cleaning      650

The home was worth $215,000 in October, 2015, their cost basis is $175,000, the value of the land 15% of the cost basis, and the applicable depreciation percentage is 2.564%.

  1. Both Gina and Mark contribute the maximum amount to their Individual Retirement Accounts.
  2. Mark enrolled in an advanced Java course at the local community college.  The tuition was $1,100.  The software and textbook for the course cost was $225.
  3. During the year, the couple received the following interest and dividends:

Second Bank savings account interest   $200

Marble School District bonds     180

Saber Corporation bonds             1,900

Hi-Flow Corporation dividends (qualifying)      450

And they sold the following investments (cost basis not reported to IRS)


Sale Date

Purchase Date

Sales Price



Cost Basis

Doonberg Inc.






Troon Corp






Augusta Motors






  1. Mark’s brother Joey dies January 23.  Mark receives Joey’s 2012 Corvette (fair market value $32,000), 200 shares of Goober Corporation stock (fair market value $2,000), and his brother’s home (fair market value $125,000) in settlement of the estate.

Mark receives $100 dividends (qualified) on the Goober stock in June.  In October, Goober declared a 25% stock dividend when the stock is selling for $15.  Mark receives 50 additional shares of stock on November 13.  Mark sells the 50 dividend shares on December 10 for $700 (cost basis not reported to IRS).  On December 22, Mark sells Joey’s home for $128,000.

  1. Gina works for Fox Corporation as a drilling superintendent. NOTE: you will need to come up with her W-2 box 1 information. (email me with questions since I want you to come up with the correct wages for her Form 1040). Her annual salary is $96,000.  In 2017, she receives a bonus of $12,000.  Fox withholds $16,200 of her salary and bonus for federal taxes and the company also withheld Colorado income taxes of $2,775.  Gina receives the following employment related benefits from Fox during 2017:

Fox provides all employees with medical insurance (Gina’s insurance cost $8,600) and group-term life insurance at twice their annual salary up to a maximum coverage of $200,000 (note: the employer is required to report as income any group-term life insurance over $50,000 coverage at 1.08 per $ amount over $50,000).

Fox has a qualified pension plan that covers all employees.  Under the plan, Fox matches contributions to the plan up to 5% of the employee’s annual salary.  Gina makes the maximum allowable contribution, which is matched by Fox.

Gina pays $2,000 into the company’s flexible benefits plan.  Gina spends $2,200 on medical and dental expenses not covered by insurance.  She receives $2,000 from the flexible benefits plan for these expenses.

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