Jeannie are married and file a joint return. They have four…
Tony and Jeannie Nelson are...
Tony and Jeannie Nelson are married and file a joint return. They have four childrenSubmitted: 6 months ago.Category: Multiple Problems
whose ages are: 15,17,19 & 23. The three youngest live at home with their parents
and qualify as their dependents. The oldest Roger got married during 2017 and
lives with his wife, Jane. They provide you with the following information regarding
their 2017 tax return:
1. ***** ***** is an aerospace engineer he runs an engineering firm, Nelson
Engineering, as a sole-proprietorship and has very lucrative contracts with
numerous aerospace companies. Tony rents an office downtown where he
meets with clients and conducts business. Tony reported the following items
of income and expenses from his engineering firm:
• Revenue $675,000
• Wages expense $162,000
• Rent Expense $ 60,000
• Depreciation $ 3,400
• Other Expenses $ 42,000
2. Jeannie Nelson is an artist. She is known for beautiful Arabian influenced
abstracts. She also volunteers with the Girl Scouts of America and helps
encourage the arts. On March and September of this past year she had an
exhibition and sold several paintings at each. She estimates that the cost of
each painting in canvas and supplies is about $100. The sales are as follows:
• March 17- 6 paintings for $1,200 each $ 7,200
• September 17 – 10 paintings at $1,400 $14,000
3. She paints in a studio located in a separate building on the property of their
home. The expenses related to the studio allocated on the basis of square
footage are as follows:
• Depreciation $2,500
• Taxes $1,600
• Utilities $1,000
4. They sold the following assets during this year:
a. 4/4/2017 sold for $21,000 stock in York Co. that was purchased for
b. 7/1/2017 200 shares of New Co. for $32,000 total that were
purchased on 8/7/2016 for $14,000.
c. 8/5/2017 sell for $52,000 an antique necklace that was a gift from
Jeannie’s great-aunt on January 16, 1999 when its FMV was $2,500.
d. 10/1/2017, they sold a portion of parcel of land for $25,000 that had
a basis of $14,000 and was purchased in 2002.
e. 11/15/2017 sold stock in Space Explorers Inc. for $32,000 that they
had purchased a few years ago for $14,000.
Exam 2 – Take Home
5. On April 13, the couple paid their $1,400 in state taxes with their 2016 state
tax return. The couple’s state and local sales taxes were $5,900.
6. On October 1st they donated the portion of the parcel with a small building to
the Girl Scouts of America for use as an art studio. They had purchased the
building in 2002 and recently divided a portion for sale as undeveloped land
(see 4d above). The portion with the building has a basis of $65,000. A
professional appraiser determined the fair market value of the property was
$92,000 on September 24th.
7. Tony & Jeannie both received corrective eye surgery, at a total cost of $4,200
(not reimbursed by insurance.) They also spent $2,300 for braces for the 15
year old (not reimbursed by insurance). In addition, they paid $4,500 in
health insurance premiums to cover the family.
8. The Nelson’s spent $ 6,200 in home mortgage interest on their original
acquisition cost of $450,000.
9. During the year they paid their former tax preparer $1,200 to prepare their
prior year tax return.
10. The Nelsons paid quarterly estimated tax payments of $12,000 each, based
on their 2016 liability of $42,500.
Using the above information answer the following, be sure to show
A. Compute the taxable income from Nelson Engineering.
B. Compute the taxable income related to Jeannie’s Abstracts.
C. Complete the following chart related to the Nelson family’s sale of assets:
Item Proceeds Cost Short-Term
D. Based on the results from above, compute the total gross income of the
E. Review the items identified in 5-9 above and compute the amount deductible
F. Compute the taxable income for the Nelsons. Segregate the taxable income
into the appropriate character of income.
G. Compute the total tax liability for 2017 as well as the amount of tax due
H. Based on the results for 2017 and your knowledge of the changes for 2018,
how much should the Nelson’s pay as quarterly estimated payments for