John Alan Kelly and Rosalyn Elaine Kelly, a married
couple, live at 3822 Robin Lane Houston, Texas 77049-7236. Their home telephone number is (713) 468-9721,
home fax number is (713) 591-7014, cell telephone number for John is (832)
921-8427 and cell telephone number for Rosalyn is (832) 366-8122. John, whose social security number is
437-29-1297 and date of birth is April 2, 1963, is employed as a Loan Officer
with Houston First National Bank located at 1100 Smith Street Houston, Texas
77002-0002 and whose Employer Identification Number is 42-4732689. John's work telephone number is (713)
654-8739 and E-Mail address is email@example.com. Rosalyn's social security number is
443-63-7289 and her date of birth is January 10, 1965. She is presently a Self-Employed sole owner
of a small retail bookstore (ROSALYN'S
BOOKSTORE) which she has owned and operated since January 6, 2011. Rosalyn's Bookstore is located at 2345 Marshall Lane Houston, Texas 77044-5943, her work telephone number
is (713) 434-1275, her fax number is (713) 434-1276 and E-Mail address is firstname.lastname@example.org. The Employer Identification Number for the
bookstore is 76-5678901. The Kellys have
two (2) children who lived with them for the entire year of 2014 and that they
fully supported for the entire year of 2014.
The two (2) children are Jocelyn Danielle Kelly (age 17 (date of birth
November 14, 1997) and social security number 643-28-1863) and Charles Aaron
Kelly (age 10 (date of birth June 16, 2004) and social security number
623-51-2467). In addition, the Kellys
provided in 2014 more than one-half (1/2) of the support of Rosalyn Kelly's
mother, Louise Myra Anderson, (age 74 (date of birth May 29, 1940) at the end
of 2014 and social security number 440-83-6278) and who lived the entire year
of 2014 in her own home located in Livingston, Texas and her only Gross Income
for 2014 was nontaxable Social Security Benefits.
The Kellys, who neither wishes to contribute to the
Presidential Election Campaign Fund, have presented you with the following
information to prepare their 2014 Federal Income Tax Return:
(a) John earned a salary from Houston First
National Bank, Inc. of $71,540 (also Social Security Wages and Medicare
Wages). Federal Income Taxes withheld
from his pay was $7,832, Social Security Taxes (FICA) withheld was $4,435 and
Medicare Taxes withheld was $1,037. John
is covered by a retirement pension plan provided by Houston First National
(b) The Kellys received Interest on Savings Accounts
of $1,200 from Houston First National Bank and Interest of $520 from Harris
County Bonds that they own. In addition,
the Kellys received Cash Dividends of $442 (all "Qualified Dividends")
from Common Stock owned in Bush Corporation.
(c) Rosalyn uses the Cash Method Of
Accounting for Federal Income Tax purposes for her business, ROSALYN'S BOOKSTORE, and the
business code for the business for Federal Income Tax purposes is 451211. Relevant Financial Information for the
business for 2014 is as follows:
Returns And Allowances 2,350
Of Customers 500
(Related To Bookstore Retailers) 400
Inventory January 1, 2014 $28,400
Inventory December 31, 2014 16,800
In 2014 12,900
is valued at cost. There were no changes
in determining quantities, costs or valuations between Opening and Closing
the above Revenues, Expenses and Expenditures represent cash transactions
occurred during the year of 2014)
Description Cost Date Purchased
Computer And Printer $1,600.00 January 2, 2014
Software 250.00 January 2, 2014
And Fixtures 12,000.00 March 5, 2011
the above assets are used exclusively
at Rosalyn's Bookstore and were
originally placed in service on the date
elected to take the Section 179 Deduction for all assets acquired during the
year of 2014. Assets acquired before 2014
are depreciated using the designated useful life and the Section 179 Deduction
was not elected. (The First Year Additional Depreciation was not
elected for any of these assets).
Rosalyn also drove in 2014 her personal automobile, a 2013
Buick Park Avenue, which she acquired on April 28, 2013, a total of 6,000 miles
(500 miles per month) for business purposes.
Rosalyn has always used the automobile in her business and drove the
automobile a total of 15,000 miles for the entire year of 2014 including 5,200
of commuting miles (Beginning Mileage Reading was 35,000 miles and Ending
Mileage Reading was 50,000 miles). Rosalyn
uses the Standard Mileage Method (Automatic Mileage Method) ($.56 per mile in 2014)
to recover the cost of using her automobile for business purposes. In 2014, Rosalyn also paid $200 for parking
and toll fees while using the automobile for business purposes and paid a total
of $400 of Interest on the loan for the automobile.
(d) The Kellys also own a rent home that they
rent out (Actively Participate) to people unrelated to them. The rent home (not Low-Income Housing) is
located at 825 Lincoln Street
77048-3252. The Kellys originally began to rent this home
on May 1, 1995 when its depreciable basis was $30,000 (total cost of $37,500
less $7,500 allocated to the Land (Straight-Line Depreciation not
elected)). Relevant information that pertains
to the rent home for 2014 is as follows:
Rental Revenues $5,600
(Real Estate) Taxes 1,020
(All of the above Rental Revenues
and Rental Expenses represent Cash transactions
during the year
In addition to the above, John Kelly
drove in 2014 his personal automobile, a 2011 Chevrolet Caprice, in attending
to the rental property a total of 400 miles (33.33 miles per month). Finally, on June 19, 2014, the Kellys
purchased new appliances (ie. refrigerator, stove and dishwasher) (five-year
property) for the Rental Property for a total purchase price of $1,950.
(e) John attended a Banking Seminar in San
Francisco, California. He incurred
unreimbursed expenses of $1,450 for airfare, lodging and meals ($160 of the $1,450
was for meals).
In addition, John drove in 2014 his
personal automobile a total of 1,200 miles (100 miles per month) for work
related purposes. John purchased the car
on February 3, 2011 and has always used it for work related purposes. He drove the car a total of 12,000 miles in 2014
of which 5,200 were commuting miles (average daily round trip commuting
distance of 20 miles per day) (Beginning Mileage Reading was 50,000 miles and
Ending Mileage Reading was 62,000 miles).
John has always used the Standard Mileage Method (Automatic Mileage
Method) in recovering the cost of using his automobile for work related
(f) The Kellys incurred the following
personal expenses during the year of 2014:
Expenses (Unreimbursed) (Various):
For Themselves And Their Children $4,500
For Rosalyn's Mother 900
Estate Taxes On Personal Residence
Mortgage Interest On Personal Residence 9,600
On Car Loans 2,400
Contributions - (Cash) (Various Charities) 1,600
Contributions - (Property – Clothing, etc.)
(FMV) 460 ($1,000 ORIGINAL COST)
Hope 1240 North Main Street Houston, Texas 77001-8877)
Preparation Fee 225
(g) The Kellys utilizes the Internal Revenue
Service (IRS) Optional State Sales Tax Table (See page A-14 through page A-15
of the Instructions for Schedule A) to compute their Itemized Deduction for
General Sales Taxes (Their State General Sales Tax Rate is 6.25% and their
Local General Sales Tax Rate is 2.00% for a Total Sales Tax Rate of 8.25%).
(h) The Kellys paid an unrelated
housekeeper/child caretaker, Shelly R. Baker, (address 3785 Pinkston Street
Houston, Texas 77046-2386 and social security number 466-37-3682) and telephone
number (713) 864-3267, $300 per month during the entire year of 2014 to care
for their youngest child at their home while they were at work.
(i) The Kelly's 2013 Federal Income Tax Liability was $12,420.
(j) Rosalyn Kelly made the following Estimated
Tax Payments for the year of 2014:
15, 2014 $2,000
16, 2014 3,100
15, 2014 1,200
15, 2015 2,100
(k) The Kellys will file a Joint Federal
Income Tax Return for the year of 2014.
(l) If the Kellys will receive a refund for
their 2014 Federal Income Tax Return, they would like for the refund to be
Direct Deposited into their bank account as follows:
Name Of Financial Institution: Annette Bank Of Texas
Routing Number: 111000025
Checking Account Number: 0049637821732
on the Tax Return was covered by Health Insurance for the entire year.
NOTE: Visit "www.irs.gov"
(Search in top right hand box for "Tax Tables" then click on "2014 Instruction 1040") for the Tax Table (not the Tax Rate Schedules)
to use to assist in
determining the Tax Liability on the Taxable Income (if preparing Income
REQUIRED FORMS AND SCHEDULES
Form 1040 Schedule B
Schedule E Form 2106 Form 4562
Schedule C Schedule SE Form
2441 Form 8582
The Income Tax Project is due on JULY 24, 2015. (PLEASE REMEMBER TO PUT YOUR NAME ON THE
1. Schedule E total
Depreciation (Line 18): $1,480.80. (Also Line 22 – Form 4562).
2. Schedule E Net Income (Loss) (Line 26): ($644.80).
3. Schedule C Net Income (Line 31): $40,595.20.
4. Schedule A General Sales Taxes Deduction
(Line 5): $1,692.24.
5. Schedule A total Deduction (Line 29): $15,883.95.
6. Adjusted Gross Income (Line 37 and Line
38 (Form 1040)): $110,264.44.
7. Tax Liability On Taxable Income (Line 44
Form 1040): $10,322.30.
8. Form 2441 Credit For Child And Dependent Care Expenses (Line 11):
9. Child Tax Credit (Line 52 (Form 1040): $950.00.
Refund (Line 75 and Line 76a (Form 1040)): $1,723.78.
THERE MAY BE SMALL DIFFERENCES FROM THESE CHECK FIGURES DUE TO