Tax Problem complete Form 1040 for the year, including Schedules A, B, C, and SE of husband and wife. And compute the couple’s tax liability for the year.

Tax Problem complete Form 1040 for the year, including Schedules A, B, C, and SE of husband and wife. And compute the couple’s tax liability for the year.

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Tax Problem complete Form 1040 for the year, including Schedules A, B, C, and SE of husband and wife. And compute the couple’s tax liability for the year. George (445-42-5432) and Christina Campbell (993-43-9878) are married with two children, Victoria, 7, and Brad, 2. Victoria and Brad’s Social Security numbers are 446-75-4389 and 449-63-4172, respectively. They live at 10137 Briar Creek Lane, Tulsa, OK 74105. George is the district sales representative for Red Duck, a man-ufacturer of sportswear. The company treats him as an independent contractor. His principal job is to solicit orders of the company’s products from department stores in his territory, which includes Oklahoma and Arkansas. The company provides no office for him. Christina is a maker of fine quilts which she sells in selected shops in the surrounding area. The couple uses the cash method of accounting and reports on the calendar year. Their records for the year reveal the following information: 1. George earned $65,000 during the year and paid estimated taxes of $5,000. 2. Christina’s income and expenses of her quilting business, Crazy Quilts, include
Quilt sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Telephone (long-distance calls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100

Christina makes all of the quilts at home in a separate room that is used exclusively for her work. This room represents 10% of the total square footage of their home. Expenses related to operating the entire home include utilities, $2,000, and insur-ance, $500. Depreciation attributable solely to the home office is $800. Christina computes her deduction relating to use of her car using actual expenses, which included gas and oil, $900; insurance, $300; and repairs, $100. The car is fully de-preciated. Her daily diary revealed that, for the year, she had driven the car a total of 20,000 miles, including the following trips:
Trip Description
Home to sales outlets and return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Miles
Between sales outlets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 Miles
Miscellaneous personal trips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,000 Miles
3. George incurs substantial expenses for travel and entertainment, including meals and lodging. This is the second year that George has used the standard mileage rate for computing his automobile expenses. During the year he drove 50,000 miles; 40,000 of these were directly related to business. Expenses for parking and tolls directly related to business were $90. Total meal and lodging costs for days that he was out of town overnight were $600 and $1,200, respec-tively. Entertainment expenses were $400.
4. This is George’s second marriage. He has one child, Ted (age 11), from his first marriage to Hazel, who has custody of the child. He provides more than 50% of the child’s support. The 2007 divorce agreement between George and Hazel provides that George is entitled to the exemption for Ted. George paid Hazel $4,800 during the year, $1,600 as alimony, and the remainder as child support. Ted’s Social Security number is 122-23-3221.
5. The couple’s other income and expenses included the following:
Dividends (IBM stock owned separately by George) . . . . . . . . . . . . . . . . . .400
Interest on redeemed Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700
Interest on City of Reno bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566
Interest paid on home mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Real property taxes on home. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .900
Safety deposit box fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
State income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$4,000

6. Both taxpayers elect to give to the Presidential campaign fund.
Compute the couple’s tax liability for the year. If forms are used, complete Form
1040 for the year, including Schedules A, B, C, and SE. Ignore any alternative minimum tax.

George (445

42

5432) and Christina Campbell (993

43

9878) are married with two children,

Victoria, 7, and Brad, 2. Victoria and Brad’s Social Security numbers are 446

75

4389 and 449

63

4172, respectively. They live at 10137 Briar Creek Lane, Tulsa, OK 741

05. George is the

district sales representative for Red Duck, a man

ufacturer of sportswear. The company treats

him as an independent contractor. His principal job is to solicit orders of the company’s products

from department stores in his territory, whic

h includes Oklahoma and Arkansas. The company

provides no office for him. Christina is a maker of fine quilts which she sells in selected shops in

the surrounding area. The couple uses the cash method of accounting and reports on the calendar

year. Their r

ecords for the year reveal the following information: 1. George earned $65,000

during the year and paid estimated taxes of $5,000. 2. Christina’s income and expenses of her

quilting business, Crazy Quilts, include

Quilt sales . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,000

Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

600

Telephone (long

distance calls) . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .

.1

00

Christina makes all of the quilts at home in a separate room that is used exclusively for her work.

This room represents 10% of the total square footage of their home. Expenses related to

operating the e

ntire home include utilities, $2,000, and insur

ance, $500. Depreciation

attributable solely to the home office is $800. Christina computes her deduction relating to use of

her car using actual expenses, which included gas and oil, $900; insurance, $300; a

nd repairs,

$100. The car is fully de

preciated. Her daily diary revealed that, for the year, she had driven the

car a total of 20,000 miles, including the following trips:

Trip Description

Home to sales outlets and return . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . .

10,000 Miles

Between sales outlets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,000 Miles

Miscellaneous personal trips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,000

Miles

3. George incurs substantial expenses for travel and entertainment, including meals and lodging.

This is the second year that George has used the standard mileage rate for computing his

automobile expenses. During the year he drov

e 50,000 miles; 40,000 of these were directly

related to business. Expenses for parking and tolls directly related to business were $90. Total

meal and lodging costs for days that he was out of town overnight were $600 and $1,200, respec

tively. Entertainm

ent expenses were $400.

4

.

This is George’s second marriage. He has one child, Ted (age 11), from his first marriage to

Hazel, who has custody of the child. He provides more than 50% of the child’s support. The

2007 divorce agreement between George and Hazel

provides that George is entitled to the

exemption for Ted. George paid Hazel $4,800 during the year, $1,600 as alimony, and the

George (445-42-5432) and Christina Campbell (993-43-9878) are married with two children,
Victoria, 7, and Brad, 2. Victoria and Brad’s Social Security numbers are 446-75-4389 and 449-
63-4172, respectively. They live at 10137 Briar Creek Lane, Tulsa, OK 74105. George is the
district sales representative for Red Duck, a man-ufacturer of sportswear. The company treats
him as an independent contractor. His principal job is to solicit orders of the company’s products
from department stores in his territory, which includes Oklahoma and Arkansas. The company
provides no office for him. Christina is a maker of fine quilts which she sells in selected shops in
the surrounding area. The couple uses the cash method of accounting and reports on the calendar
year. Their records for the year reveal the following information: 1. George earned $65,000
during the year and paid estimated taxes of $5,000. 2. Christina’s income and expenses of her
quilting business, Crazy Quilts, include
Quilt sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Telephone (long-distance calls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100

Christina makes all of the quilts at home in a separate room that is used exclusively for her work.
This room represents 10% of the total square footage of their home. Expenses related to
operating the entire home include utilities, $2,000, and insur-ance, $500. Depreciation
attributable solely to the home office is $800. Christina computes her deduction relating to use of
her car using actual expenses, which included gas and oil, $900; insurance, $300; and repairs,
$100. The car is fully de-preciated. Her daily diary revealed that, for the year, she had driven the
car a total of 20,000 miles, including the following trips:
Trip Description
Home to sales outlets and return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Miles
Between sales outlets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 Miles
Miscellaneous personal trips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,000 Miles
3. George incurs substantial expenses for travel and entertainment, including meals and lodging.
This is the second year that George has used the standard mileage rate for computing his
automobile expenses. During the year he drove 50,000 miles; 40,000 of these were directly
related to business. Expenses for parking and tolls directly related to business were $90. Total
meal and lodging costs for days that he was out of town overnight were $600 and $1,200, respec-
tively. Entertainment expenses were $400.
4. This is George’s second marriage. He has one child, Ted (age 11), from his first marriage to
Hazel, who has custody of the child. He provides more than 50% of the child’s support. The
2007 divorce agreement between George and Hazel provides that George is entitled to the
exemption for Ted. George paid Hazel $4,800 during the year, $1,600 as alimony, and the

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