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DREXEL TAX 341 - Tax Return

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TAX 341 Tax Return Due May 18, 2005Harold Nash (age 59, social security number #566-36-3330) and Helen Nash (age 52, social security # 666-36-7730) presently live at 112 River Street, Waltham, MA 02154. Harold is a District Manager for Happy-In Hotels. Helen owns and manages a financial consulting business. Harold’s W-2 reflects $150,000 of wages and $33,000 of federal income tax withholding and $12,000 of state income tax withholding. They do not elect to contribute to the presidential election campaign.The Nash’s have two children. Blaire is age 20 (ss#512-36-3690) and is an assistant manager of a Blockbuster Video store located in Cambridge, MA earning $15,000 in 2004. She lives at home and puts her entire paycheck into a savings account. Robert is age 26 (ss#578-36-3324) is a full time law student atHarvard. His parents pay for his tuition, his expenses, and provide a car for him. Robert does obtain student loans of about $8,000 per year to help pay for his schooling. In 2004 Robert did not work but he had $1,500 of interest income. The Nash’s also provide over half of the support for Harold’s father-in-law,Matt Dash who is age 68 (ss#568-72-6051). Matt is Harold’s father-in-law from his first marriage, which ended 10 years ago when his first wife died in a car accident. Matt’s only source of income is $8,900 of social security income. Neither Robert nor Matt live with Harold and Helen, but Blaire does. Harold receives a pension (on a Form 1099-R) from his first wife’s employer of $300 per month.Helen owns a financial consulting business (EI# 76-2443565), which she began in 1998 as a sole proprietorship. She uses the cash basis of accounting and works out of her home. Her home has a total of 3,200 square feet and her office has 400 square feet of space. Helen is not a good accountant and mixes up her business and personal expenses. Her 2004 receipts and disbursements listed in her checkbook are as follows:Cash receipts from services $325,000Computer software for financial planning 3,000Speeding ticket while visiting client 150Utilities for the house 5,400State income taxes paid in 2004 for Nash’s 2003 MA tax return 5,000Advertising 2,550Maintenance 3,200Paper and supplies 5,500Secretarial service 35,040Health insurance for Helen and the family 5,000Postage 1,800Interest expense on business loan 4,500Entertainment expenses 300Charitable contributions to Drexel University 3,000Repairs on computer equipment 1,200Contribution to ROTH IRA for Helen 3,000Miscellaneous expense 500Home insurance 750Car Insurance 2,500** Ignore depreciation on her home for this problem.On March 7, 2004, Helen purchased a new computer system for $3,500 and wishes to utilize Section 179 expense and any available bonus depreciation. Her existing assets are listed below, followed by the original tax basis (note Section 179 was not used previously).Office furniture purchased 2/5/99 $4,000Copy Machine purchased 2/15/99 $1,000Helen drove 12,000 miles for business and 3,000 mile for personal purposes this year. Her car cost $30,000 and was purchased on 1/5/03.Securities sold during the year included 100 shares of Seal Corporation, which was sold for $7,400 on May 7 and purchased on June 6, 1999 for $6,000. The Nash’s also sold 500 shares of Luke Corp. on March 4 for $8,800. They purchased Luke Corp. stock on 11/12/92 for $14,000.Helen is a 50% partner in The Grapevine partnership. The Grapevine partnership reported $40,000 of ordinary income this year and distributed $10,000 to each partner.The following was paid out of the Nash’s joint checkbook:Dentist bill for Blaire 450Automobile insurance premiums 3,700Subscription to Professional Financial magazine 80Political contribution to Governor’s campaign 400Personal interest on VISA credit card 660Real estate taxes 8,500Mortgage interest 12,600Unreimbursed prescription drugs 350Tax return preparation fees 450Dues to Gold’s Gym for aerobic classes 500Cash contribution to church 5,000Personal auto property tax 235Sales tax on new car purchase 560Investment interest expense from margins 1,850The Nash family also gave various used clothing items to Goodwill and has their receipts. Original cost was $900 and estimated FMV was $300. Harold drove his personal car (1999 Ford Taurus) 17,000 miles during 2004. These miles included 3,000 commuting miles and 6,000 miles of unreimbursed business travel. Harold drove 800 miles as a volunteerfor the Red Cross. Harold’s car was purchased on 6/1/00. Harold has always kept a written log of all his business travel. Harold also incurred unreimbursed meals and entertainment expenses of $250 and parking fees of $300 both related to his job. Dividends of $8,200 (on Form 1099-DIV) were received from Golden Corporation. Dividends from Smith Barney of $12,500 were also received in 2004. Interest of $550 was reported on a Form 1099-INT for the Nash’s savings account. Interest of $500 on Massachusetts Municipal Bonds was received in 2004.The Nash’s made four estimated tax payments of $2,500, totaling $10,000. They also made four estimatedtax payments in 2004 to the State of Massachusetts for $400 each, totaling $1,600. All estimated tax payments were paid in 2004. Last year (2003) the Nash’s received a Federal refund and credited $15,200 to their 2004 Federal Income Tax. * * *Requirements: Prepare a 2004 Income Tax Return with all supporting schedules and worksheets. Assume there are no interest and penalties and no alternative minimum tax. Also include a detailed calculation of depreciation and tax


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DREXEL TAX 341 - Tax Return

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