fill appropriate forms file their tax returns

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Tax Return-Individual Number Five (after Chapter 12)

 

Instructions:

 

Please complete the required federal individual income tax return forms for Joseph and Diana Cohen for the 2013 tax year.  Ignore the requirement to attach the Form(s) W-2 to the front page of the Form 1040.  If required information is missing, use reasonable assumptions to fill in the gaps.

 

Joseph and Diana Cohen live in Pleasantville, New Jersey.  Joseph is the Vice President of Sales at a small start-up company.  Diana is a former advertising executive who currently consults with former clients.  She also serves on the board of directors of an advertising company.  The Cohens have three children: Rebecca (age 18), Alan (age 15), and David (age 12). In January, Rebecca left home to attend a liberal arts college.  All three children qualify as Joseph and Diana’s federal income tax dependents. The Cohens plan to file a joint tax return.  The Cohens provided the following information:

·         Joseph’s social security number is 598-94-2583

·         Diana’s social security number is 301-52-2942

·         Rebecca’s social security number is 887-44-8710

·         Alan’s social security number is 810-42-9092

·         David’s social security number is 855-11-3021

·         The Cohen’s mailing address is 85 North Maple Drive, Pleasantville, New Jersey 08233

 

Joseph Cohen reported the following the following information relating to his employment during the year:

 

Company

Gross Wages

Federal Income Tax Withholding

State Income Tax Withholding

Alternative Energy

$115,325

$29,230

$14,400

 

The above amounts do not reflect any income items described below.  Joseph’s employer withheld all payroll taxes it was required to withhold.

 

Diana Cohen received the following revenue during the year (she uses the cash method of accounting).

 

Consulting revenue reported to her on a Form 1099-MISC, Box 7

                High-end Retail                                                 $32,000

                Jensen’s Health Products                             $8,500

                Strategic Solutions                                           $3,750

 

                Board of director compensation reported to her on a Form 1099-MISC, Box 7

                                Natural Sunshine, Inc.                                    $6,500

 

 

 

 

 

 

 

During the year, Diana paid the following business expenses:

 

                Consultant-related:

                                Airfare                                                                  $2,900

                                Hotel                                                                     $1,450

                                Meals                                                                    $390

                                Parking                                                                 $320

               

Diana drove 290 business miles for her consulting-related activities (she has documentation to verify)

 

               

                Board of Director-related:

                                Meals                                                                    $125

                                Hotel                                                                     $225

 

Diana drove 315 business miles for her board of director activities (she has documentation to verify)

 

Neither of Diana’s business activities s required the filing of Form(s) 1099 to report payments she made during the tax year.  In addition, Ms. Cohen drove a 2011 Lexus purchased on January 1, 2011 for all of her business mileage.  She drove the vehicle a total of 10,605 miles during the year for all purposes.  Diana has written documentation to support the mileage amounts.  She also has access to another vehicle for personal purposes.

 

The Cohens also received the following during the year:

 

Interest income from First Bank of New Jersey                                  $320

Interest income from Patterson, New Jersey School District        $200

Interest income from U.S. Treasury Bond                                             $350

Interest income from General Mills corporate bond                        $400

Qualified dividend income from Rio Tinto                                             $1,500

Qualified dividend income from Microsoft                                           $750

Qualified dividend income from Cooper Tire                                       $200

Qualified dividend income from Cardinal Health                                                $425

Qualified dividend income from Union Pacific                                     $140

Qualified dividend income from Procter & Gamble                           $190

Qualified dividend income from PepsiCo                                                               $225

Qualified dividend income from Kellogg                                                                $200

Qualified dividend income from Abbott Labs                                       $275

Qualified dividend income from 3M                                                        $350

Dividend income (not qualified) from China Fund                             $2,000

 

The Cohens did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.

 


 

The Cohens had the following activity in their brokerage account during the year (all transactions were reported on a form 1099-B with Box A checked):

 

Sold 2,000 shares of Microsoft                                   7/1/13                                   $22,500

Sold 75 shares of Apple                                                 4/15/13                                $28,750

Sold 350 shares of Cooper Tire                                   10/14/13                              $14,700

Sold 1,000 shares of Cardinal Health                        9/3/13                                   $35,000

Sold 50 shares of Union Pacific                                   1/7/13                                   $2,750

Purchased 100 shares of Procter & Gamble          7/10/13                                $7,700

Purchased 75 shares of Apple                                    4/18/13                                $29,000

Purchased 350 shares of Cooper Tire                      11/1/13                                $14,000

Purchased 350 shares of PepsiCo                              5/14/13                                $32,000

Purchased 300 shares of Kellogg                                               10/14/13                              $21,000

 

Relevant tax basis/holding period information related to sales of securities in the current year:

 

Purchased 2,000 shares of Microsoft on 5/1/13 for $21,000

Purchased 200 shares of Apple on 3/8/2011 for $90,000

Purchased 300 shares of Cooper Tire on 1/12/2010 for $9,000

Purchased 50 shares of Cooper Tire on 6/28/13 for $2,000

Received 1,000 shares of Cardinal Health from Diana’s father as a gift on 10/10/97.  The donor’s basis was $7,000.  Fair market value of the stock at the date of the gift was $41,000

Purchased 100 shares of Union Pacific on 9/5/12 for $6,000

 

The Cohens have a $43,000 long-term capital loss carryover from their prior tax year.

 

The Cohens received a New Jersey state income tax refund of $400 in May of 2013.  The Cohens received the refund because they had overpaid their New Jersey state individual income tax in 2012.  On their 2012 Federal income tax return, the Cohens deducted and received tax benefit for all of the state tax income taxes they paid in 2012.

 

Diana is a 10% owner in an advertising agency named Bright Ideas (“BI”) (EIN 20-1234567).  BI is a Subchapter S corporation.  The company reported ordinary business income for the year of $150,000.  Sarah acquired the stock several years ago.  Her basis in the stock before considering her 2013 income allocation was $92,000.  Sarah is a passive owner with respect to this entity.

 

Diana is also a 20% owner in Natural Sunshine, Inc. (“NS”) (EIN 24-9876543).  NS is a Subchapter S corporation.  The company reported an ordinary business loss for the year of ($80,000).  Sarah acquired the stock several years ago.  Her basis in the stock before considering her 2013 loss allocation was $45,000.  Sarah is a passive owner with respect to this entity.

 

Joseph received 5,000 shares of restricted (common) stock from his employer on July 1, 2013.  The terms of the restricted stock grant are such that if Joseph is still employed by Alternative Energy on July 1, 2018 the entire 5,000 shares will vest and become his property.  Joseph, upon the advice of his tax advisor, prepared and filed an IRC Section 83(b) election on July 8, 2013.  On July 1, 2013, shares were valued at $5 per share.  Joseph estimates the value of the shares in five years will be at least $150 per share.  Joseph notified Alternative Energy about the IRC Section 83(b) election in a timely manner.  None of the income tax consequences of this restricted stock grant were included in the $115,325 reported as part of Joseph’s gross wages (see above).

 

In May, Joseph was injured in a home accident.  The injury prevented Joseph from working for about a month.  During this time, Joseph received $15,000 in disability payments attributable to a disability insurance policy.  The disability policy premiums were paid on Joseph’s behalf as a nontaxable fringe benefit. 

 

The Cohens paid the following expenses during the year:

 

Dentist (unreimbursed by insurance)                                                                     $1,500

Doctors (unreimbursed by insurance)                                                                    $ 2,425

Prescriptions (unreimbursed by insurance)                                                          $   675

Real property taxes on residence                                                                             $7,525

Vehicle property tax based upon value                                                                  $1,250

Mortgage interest on principal residence                                                              $12,550

Margin interest paid to broker                                                                                   $600

Contribution to United Way                                                                                        $2,000

Contribution to American Cancer Society                                                              $5,000

Contribution to neighborhood drive to oppose development project      $500

Contribution to the Temple Mount Synagogue                                                  $12,000

Fee paid to Mouser, Johnson, and Hintze CPAs for tax preparation          $450

 

The Cohens also donated clothing, electronics, furniture and other household goods to the Salvation Army of Pleasantville, New Jersey on April 15, 2013. Estimated thrift value of the goods donated is $275.

 

Miscellaneous Information

 

On September 1, the Cohens paid $200 in foreign taxes attributable to the dividend received from the China Fund.

 

During the year, the Cohens paid a portion of Rebecca’s tuition to attend The College of Liberal Arts of New Jersey (CLA).  They also purchased Rebecca’s school books.  Rebecca attended the spring/summer and the fall semesters as a full-time student.  In total, the Cohens paid $9,000 for tuition and $2,000 for books.  Rebecca used $6,000 from a scholarship she received from CLA to pay the remaining $6,000 of tuition for the year.  Rebecca was not required to perform any services as a condition of accepting the scholarship.  Rebecca was not employed during the year.  CLA’s address and employer identification number (EIN) is as follows:

 

The College of Liberal Arts of New Jersey

65 Ivory Tower

Penns Grove, NJ 08069

EIN- 22-5698324

 

The Cohens would like to contribute to the Presidential Election Campaign.  The Cohens would also like to receive a refund (if any) of tax they may have overpaid for the year.  Their preferred method of receiving the refund is by check.

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