Documentation for Taxpayers: Thomas J. & Martha N. Hill

Prepared By: Bismita Bhandari

University of Texas at Dallas

Acct 3350.001- Fundamentals of Taxation-S15

Thomas J. Hill (Husband)

DOB: 07/01/1968Social Security Number: 111-11-1111Address: 5555 Orange Blossom Trail, Dallas, TX, 75080Occupation: Regional Manager for a gaming company (MGM)Office Address: Suite 419, 110 Palm Boulevard, Dallas, TX

Martha N. Hill (Wife)

DOB: 03/20/1969Social Security Number: 123-45-6781Address: 5555 Orange Blossom Trail, Dallas, TX, 75080Occupation- Self-Employed CPA, Works part-time on a consulting basis

Filling Status: Married filing jointly and use the cash basis for tax purposes.

Hill’s Household

Anna Marie (Age 18) - (Daughter)DOB: 05/02/1995Social Security Number: 123-45-6784Daughter graduated from high school and undecided about college. Her income is $17,200 so she can claim independent.

Tyler Hill (Age 17) - (Son)DOB: 06/30/1996 Social Security Number: 123-45-6788Tyler can be claimed as a dependent since he is in high school and have no income.

1) Thomas’s Income (W-2) His gross income is $125,000 report on W-2. I included the $30,000 bonuses

since he received it in 2013. Salary: $95,000+$30,000 =$125,000 He contributed $6,100 in 2013 towards employer’s group health insurance plan

but didn’t contribute to the 401(k) plan.

2) Thomas’s Employment-Related Expenses MGM reimbursed Thomas a total of $5,000 for 2013 are as follows:

Airfare $6000 (Full Deductible) Lodging: Not at a MGM $4,200 (Full Deductible) Lodging: Value of stays at a MGM $3,300 (Full Deductible) Meals $800 (800*50%) =$400 Entertainment $350 (350*50%) =$175 Car rentals, limos, taxis $750 (Full Deductible) Therefore, $6000+$4,200+$3,300+$400+$175+$750Total= $14,825- $5,000= $9,825 (Deductible)

Thomas had to pay fines of $750 for speeding which is not deductible.3) Martha’s Business Expenses for 2013 are as follows: (Schedule C)

Supplies $14,000 (Deductible)Legal $10,000 (Deductible)CPA license fee $1,500 (Deductible)Subscriptions to professional journals $7,500 (Deductible)

Therefore, total business expenses= $14,000+ $10,000+$1500+$7,500 =$33,250

In addition, she drove 9,000 miles on her job assignments.So (9,000*0.565 standard rate) = $5,085 (Deduct from Taxable Income)

4) Like-Kind Exchanges: (Schedule D) Inherited the property in Levy County In 1990, the land was worth $400,000 where as in 2013, the land is worth

$1,000,000. She sold the building which was worth of $1,000,000 and received $800,000 cash.

5) Home Office: (Schedule A)Martha uses 200sq. feet of a 2,000sq foot house as her office. The house has the following expenses:Ad. Valorem taxes on personal residence $7,000Interest on home mortgage $15,000Repairs to roof $2,000Utilities $3,000

Since, the Hill used the office for guests and they spend the night in the room on a hide a bed sofa so it’s not deductible.

6) Shares of Groupon Common Stock: (Schedule D) On August 5, 2008, Thomas purchased 5,000 shares for $20 a share.

Therefore, Cost: (5000*$20) = $100,000Groupon was taken over by creditors, so its common stock became worthless. They had a loss of ($100,000) in common stock.

7) The Hill’s had the following receipts for 2013:Martha’s consulting income $75,000 (Taxable)Interest Income:

City of Dallas bonds $8,000 (Not Taxable) Ford Motor Company bonds $9,000 (Taxable)

Loan repayment by Sarah Duval $3,000 (Not Taxable)Cash gifts from Mary’s parents $5,000 (Not Taxable)Federal income tax refund (2012 return) $9,000 (Not Taxable)

Total Income= $75,000+ $9,000= $84,000

Martha’s consulting business gross income was $75,000 which is reported on the Schedule C. Collected $7,000 in 2013 from the work she performed in 2012.

$15,000 A/R and $6000 doesn’t include because she is a cash basis taxpayer.

Therefore, Taxable Income: $84,000

8) Hills had the following expenditures for 2013:Life insurance premiums $4,000 (Not deductible) Medical and dental expense not $14,000 (Deductible)covered by insuranceTotal= 10% of Adjusted gross income (AGI) = (14,000+4,000)-(172,909*0.10) =18,000-17291=709Therefore, Allowable Deduction =709

Taxes:State and local sales taxes $7,000 (Deductible)

Contributions:Salvation Army (Tampa branch) $500 (Deductible)Texas governor’s election fund $1,000 (Not Deductible)

So Total Deductions=709+7,000+500=$8209

During 2013, Hill’s had gambling winnings of $9,200 but losses $1,200(Schedule A).Total gain = $9,200- $1,200

=$8,0009) Hill’s tax payments:

4 quarterly income tax payments of $7,000 eachTotal income tax payments: ($7,000*4) = $28,000