Income Tax Return Project – Acct 3309 -001/003 Spring Semester 2011 Page 1 ACCT 3309- 001/003 Spring Semester 2011 Dave and Sarah Stephens Income Tax Return Project Due: Monday, March 28, 2011 Turn in the Grade Sheet with your names on it as a cover sheet.

This project is designed to help students become familiar with the process of filing a personal income tax return with the IRS and some of the common tax issues they are likely to face. Students will work on the project individually or in groups of up to four. Forms may be typed or neatly handwritten. Please do not turn in notebooks or folders or other report covers. The provided Grade Sheet will serve as the cover for the project. Using the information below, prepare a 2010 income tax return for Dave and Sarah Stephens. Include Form 1040, Form 8814 Schedules A, B, C, D and SE and any worksheet that you believe are important. All forms may be gotten from http://www.irs.gov. Disregard any tax credits for which they may be eligible or penalties for which they may be liable. In addition to the Forms and Schedules, a cover sheet will be provided. Dave and Sarah Stephens 2010 Form 1040 Dave Stephens, 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 417-64-9403. Sarah’s Social Security number is 528-59-6271. Sarah and Dave have three children—Andy, age 8; Justin, age 6; and Myra, age 3. The children’s Social Security numbers are, respectively, 377-38-2836, 377-46-7283, and 377-71-1415. The children can be claimed as dependents of Dave and Sarah. They live at 1267 Quail Run, East Bend, Oregon 74659. The Stephens 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 (sole proprietorship) business. 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 tax were withheld. Dave and Sarah received $8,000 of qualified dividends from Mobil Corporation during the year. They sold 200 shares of Tandy Corporation stock for $13,000 on June 20, Income Tax Return Project – Acct 3309 -001/003 Spring Semester 2011 Page 2 2010. The shares were purchased on October 2, 2009, for $8,700. They have a short-term capital loss carryforward from 2009 of $8,200. They sold a piano for $4,000 on May 30, 2010. The piano was purchased on April 12, 1999, for $2,500 and was used by his two sons. They also sold 500 shares of Gulf Corporation stock for $18,000 on November 30, 2010. He had purchased the stock on April 1, 2005, for $10,000. When Myra was born, her grandparents gave her a CD which generates interest every year. In 2010, the interest was $5,200. Dave and Sarah elect to include Myra’s interest on their return so that she does not have to file a separate tax return. Dave’s office is located at Suite 401, 945 Woodbridge Drive, Portland, Oregon 74625, and his employer ID number is 22-7589404. His business goes by the name of “Joints-R-Us.” 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 Utilities 3,750 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. Check figures Form 1040 Line 37 $190,850 Line 43 $133,300 Line 72 $39,600 Schedule A Line 29 $39,300 Schedule C Line 7 $300,225 Line 28 $152,880 Schedule D Line 7 ($3,900) Line 15 $9,500 Schedule SE Line 6 $8,595 Form 8814 Line 14 $4,250