YOU ARE TO PREPARE FORM 1040 AND ANY RELATED SCHEDULES BASED ON THE INFORMATION LISTED BELOW:
Mr. and Mrs. Taxpayer file on a calendar year basis and use the cash basis of accounting.
See Forms W-2 for wages received by the taxpayers.
Mr. Taxpayer has a auto repair business that he operates out of his converted garage, which completely separated from his residence. The business generated the following during 2010:
Repair Revenue $128,000
legal fees 7,750
supplies 2,000 (non-inventory)
automobile repairs 2,350 (trucks - fully depreciated)
interest expense (auto) 8,000
business taxes 2,000
Business Mileage 2,000 miles (.55 per mile)
Assets purchased during year (2010):
Balancing Machine Tools cost-16,814
Asset purchased in prior years
Testing Equipment cost $8,000 purchased in 2007 10 year property
Lift Equipment cost $12,000 purchased in 2008 7 year property
Taxpayer wants to take maximum depreciation deduction including section 179. Taxpayer purchased the 2009 property on February 1, 2010. Property is 7-year property.
Cost Allocated to Garage $22,000-purchased in 1999
Real Estate Taxes-Garage 10,500
Interest expense allocated to Garage 12,000
Note: Garage is not attached to the house and is used exclusively for the repair business.
The taxpayers received the following
Form K-1- from a partnership-- See Form K-1 attached
5. The taxpayer paid the following personal expenses:
Mortgage Interest $36,000 (residence)
Real Estate Taxes $2,000 (residence)
Employee Business expenses (800); Tax Return Preparation (2009- pd in 2010 - $2,000), CPE Courses ($500)
The taxpayer sold stock with a cost of $40,000 for $5,000. Stock was purchased 10 years ago and sold on 12/30/2010
7. The taxpayers have two children who live with them:
Dawn age-19 SSN: 123-45-1234 full time freshman student-tuition paid by parents $24,000 at LaSalle University. No earned or unearned income in 2010.
April age-12 SSN: 321-54-6789 In the 7th grade at St. Luke’s Elementary School
If you have any questions relating to the above information please give me a call. Also Mr. and Mrs. Taxpayer want to take advantage of all tax savings.
You will need tax forms that you can pick-up at any IRS office. or on line at www.irs.gov.
Forms needed: Use 2010 Forms
1040-Page 1 & 2 4797
A through E and SE
Exemption-See text Itemizations- See text
You may need additional forms based on your assumptions.
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