2024 – Group 4 Comprehensive Problems 1 Trish Himple owns a retail family clothing store Her store is located at
Chapter 8g4 – 2024
Group 4: Comprehensive Problems
- 1. Trish Himple owns a retail family clothing store. Her store is located at 4321 Heather Drive, Henderson, NV 89002. Her employer identification number is 95-1234321 and her Social Security number is 123-45-6789. Trish keeps her books on an accrual basis. The income and expenses for the year are:
Trish’s bookkeeper has provided the following book-basis fixed asset rollforward:
The truck is not considered a passenger automobile for purposes of the luxury automobile limitations.
Trish also has a qualified home office of 250 sq. ft. Her home is 2,500 sq. ft. Her 2014 purchase price and basis in the home, not including land, is $100,000 (the home’s market value is $150,000). She incurred the following costs in 2019 related to the entire home:
Utilities$2,800Cleaning900Insurance1,100Property taxes2,000Required: For tax purposes, Trish elected out of bonus depreciation in all years except 2019. She did not elect immediate expensing in any year. The tax lives of the assets are the same as the book lives shown in the fixed asset schedule above. Complete Trish’s Schedule C, Form 8829, and Form 4562 (as necessary). Make realistic assumptions about any missing data.
- 2.Lisa Kohl (birthdate 02/14/1953) is an unmarried high school principal. Lisa received the following tax documents:
During the year, Lisa paid the following amounts (all of which can be substantiated):
Home mortgage interest reported on Form 1098 (not shown)$9,540KS state income tax payment for 2018$475MasterCard interest550Life insurance (whole life policy)750Property taxes on personal residence1,525Blue Cross medical insurance premiums250Other medical expenses780Income tax preparation fee300Charitable contributions (in cash)750Lisa’s sole stock transaction was reported to her on a Form 1099-B:
On January 28, 2019, Lisa sold land for $175,000 (basis to Lisa of $130,000). The land was purchased 6 years ago as an investment. She received $25,000 as a down payment and the buyer’s 10-year note for $150,000. The note is payable at the rate of $15,000 per year plus 8 percent interest. On January 28, 2020, the first of the ten principal and interest payments is due.
Lisa also helps support her father, Jay Hawke, who lives in a nearby senior facility. Jay’s Social Security number is 433-33-2121. Lisa provides over one-half of Jay’s support but Jay also has a pension that paid him income of $14,000 in 2019. His Social Security benefits were $3,200 in 2019.
Required: Complete Lisa’s federal tax return for 2019. Use Form 1040-SR, Schedule A, Schedule B, Schedule D, Form 8949, the Qualified Dividends and Capital Gain Tax Worksheet, and Form 6252 as needed to complete this tax return. Make realistic assumptions about any missing data.![Form 1040 shows Profit or Loss from Business. The form is divided into seven sections. The header from left to right shows the following: Schedule C (Form 1040), Department of the Treasury Internal Revenue Service (99). Profit or Loss From Business (sole proprietorship), Information about Schedule C and its separate instructions is at www.irs.gov.schedulec; Attach to Form 1040, 1040NR, or 1041; partnerships generally must file form 1065, OMB No. 1545-0074, Attachment sequence No. 09. Second section shows to be filled-in fields for the following and line B is highlighted. Name of proprietor. Principal business or profession, including product or service (see instructions). Enter code from instructions: (Entry field). Business name. If no separate business name, leave blank. Employer ID number (EIN), (see instr.): (Entry field). Business address (including suite or room no), City, town or post office, state and Zip code. The options for the lines F,G, I, and J are preceded by a tick box each. Accounting method: (1) Cash, (2) Accrual, (3) Other (specify). Did you “materially participate” in the operation of this business during 2019? If “No” see instructions for limit on losses Yes; No. If you started or acquired this business during 2019, check here. Did you make any payments in 2019 that would require you to file Form(s) 1099? (see instructions) Yes; No. If “Yes” did you or will you file required Forms 1099? Yes; No. Third section,Part I – Income shows to be filled-in fields for the following: Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the “Statutory employee” box on that form was checked. An arrow from the line points to a tick box. Returns and allowances. Subtract line 2 from line 1. Cost of goods sold (from line 42). Gross profit. Subtract line 4 from line 3. Other income, including federal and state gasoline or fuel tax credit or refund (see instructions). Gross income. Add lines 5 and 6. Fourth section, Part II – Expenses shows to be filled-in fields for the following: Advertising. Car and truck expenses (see instructions). commissions and fees. Contract labor (see instructions). Depletion. Depreciation and section 179 expense deduction (not included in Part III) (see instructions). Employee benefit programs (other than health). Insurance (other than health). Interest: a Mortgage (paid to banks, etc.). b Other. Legal and professional services. Office expense (see instructions). Pension and profit-sharing plans. Rent or lease (see instructions): Vehicles, machinery and equipment. Other business property Repairs and maintenance. Supplies (not included in Part III). Taxes and licenses. Travel, meals and entertainment: Travel Deductible meals and entertainment (see instructions). Utilities. Wages (less employment credits). 27a. Other expenses (from line-48). Reserved for future use. Total expenses before expenses for business use of home. Add lines 8 through 27a. Tentative profit or (loss). Subtract line 28 from line 7. Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Simplified method filters only: enter the total square footage of: (a) your home: [Blank write-on line] and (b) the part of your home used for business: [Blank write-on line]. Use the simplified method worksheet in the instructions to figure the amount to enter on line 30. Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both form 1040, line 12(or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Form 1040, line 12, for Form 1040NR, line 13) and on Schedule SE, line 2. If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, line 3. If you checked 32b, you must attach Form 6196. Your loss may be limited. The lines 32a and 32b is preceded by a tick box each. 32 a. All investment is at risk. 32 b. Some investments is not at risk. A foot note below the form reads, “For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P, Schedule C (Form 1040) 2019.”](https://college.cengage.com/nextbook/shared/taxation/whittenburg_9780357108239/images/08239_08_unf39-t2.png?token=21FA5F3CE5FA1C19CBD1F018F6E52E00CAAAA179187AE8C35C655984E5ED3ABE4B56192FBB3B7E3FF770E940AF4B7F16014717B17308BF2EC6A22A24A59730EE)
![Form 6252: Installment sale Income. The form is divided into four sections. The header from left to right shows the following information: Form 6252, Department of the Treasury, Internal Revenue Service, Installment sale Income, Attach to your tax return, Use a separate form for each sale or other disposition of property on the installment method, Information about Form 6252 and its instructions is at www.irs.gov/form6252, OMB No. 1545-0228, 2019, Attachment Sequence No. 79, The text below the header shows filled-in and to be filled-in fields for the following, Name(s) shown on return: Howard Scripp, Identifying number. 1. Description of property: Land 2. a. Date acquired (mm/dd/yyyy) b. Date sold (mm/dd/yyyy) 3. Was the property sold to a related party (see instructions) after May 14, 1980? If “No,” skip line 4 (each option is preceded by a tick box)Yes; (tick box checked)No 4. Was the property you sold to a related party a marketable security? If “Yes,” complete Part III. If “No,” complete Part III for the year of sale and the 2 years after the year of sale (each option is preceded by a tick box)Yes; No The second section, Part I-Gross Profit and Contract Price, shows filled-in and to be filled-in fields (lines 11, 12 and 15) for the following: Complete this part for the year of sale only 5. Selling price including mortgages and other debts. Don’t include interest, whether stated or unstated: 50,000 6. Mortgages, debts, and other liabilities the buyer assumed or took the property subject to (see instructions): 0 7. Subtract line 6 from line 5:50,000 8. Cost or other basis of property sold: 20,000 9. Depreciation allowed or allowable: 0 10. Adjusted basis. Subtract line 9 from line 8: 20,000 11. Commissions and other expenses of sale 12. Income recapture from Form 4797, Part III (see instructions) 13. Add lines 10, 11, and 12: 20,000 14. Subtract line 13 from line 5. If zero or less, don’t complete the rest of this form (see instructions): 30,000 15. If the property described on line 1 above was your main home, enter the amount of your excluded gain (see instructions). Otherwise, enter -0- 16. Gross profit. Subtract line 15 from line 14: 30,000 17. Subtract line 13 from line 6. If zero or less, enter -0-:0 18. Contract price. Add line 7 and line 17: 50,000 The third section, Part II- Installment Sale Income, shows filled-in and to be filled-in fields (lines 23 and 25) for the following: Complete this part for the year of sale and any year you receive a payment or have certain debts you must treat as a payment on installment obligations. 19. Gross profit percentage (expressed as a decimal amount). Divide line 16 by line 18. For years after the year of sale, see instructions: .60 20. If this is the year of sale, enter the amount from line 17. Otherwise, enter -0-: 0 21. Payments received during year (see instructions). Don’t include interest, whether stated or unstated: 10,000 22. Add lines 20 and 21: 10,000 23. Payments received in prior years (see instructions). Don’t include interest, whether stated or unstated 24. Installment sale income. Multiply line 22 by line 19: 24,000 25. Enter the part of line 24 that is ordinary income under the recapture rules (see instructions) 26. Subtract line 25 from line 24. Enter here and on Schedule D or Form 4797 (see instructions): 6,000 The fourth section, Part III- Related Party Installment Sale Income, shows to be filled-in fields for the following: Don’t complete if you received the final payment this tax year. 27. Name, address, and taxpayer identifying number of related party 28. Did the related party resell or dispose of the property (“second disposition”) during this tax year? (each option is preceded by a tick box)Yes; No 29. If the answer to question 28 is “Yes,” complete lines 30 through 37 below unless one of the following conditions is met. Check the box that applies. (each option is preceded by a tick box) a. The second disposition was more than 2 years after the first disposition (other than dispositions of marketable securities). If this box is checked, enter the date of disposition (mm/dd/yyyy) An arrow from the line points to a [Blank write-on line]. b. The first disposition was a sale or exchange of stock to the issuing corporation. c. The second disposition was an involuntary conversion and the threat of conversion occurred after the first disposition. d. The second disposition occurred after the death of the original seller or buyer. e. It can be established to the satisfaction of the IRS that tax avoidance wasn’t a principal purpose for either of the dispositions. If this box is checked, attach an explanation (see instructions). 30. Selling price of property sold by related party (see instructions) 31. Enter contract price from line 18 for year of first sale 32. Enter the smaller of line 30 or line 31 33. Total payments received by the end of your 2019 tax year (see instructions) 34. Subtract line 33 from line 32. If zero or less, enter -0- 35. Multiply line 34 by the gross profit percentage on line 19 for year of first sale 36. Enter the part of line 35 that is ordinary income under the recapture rules (see instructions) 37. Subtract line 36 from line 35. Enter here and on Schedule D or Form 4797 (see instructions) A foot note below the form reads, “For Paperwork Reduction Act Notice, see page 4. Cat. No. 13601R, Form 6252 (2019)” A watermark on the form reads, “DRAFT AS OF June 14, 2019 DO NOT FILE.”](https://college.cengage.com/nextbook/shared/taxation/whittenburg_9780357108239/images/08239_08_unf50-t2.png?token=21FA5F3CE5FA1C19CBD1F018F6E52E00CAAAA179187AE8C35C655984E5ED3ABE4B56192FBB3B7E3FF770E940AF4B7F16014717B17308BF2EC6A22A24A59730EE)
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