James A. Jones and his wife, Jean B. are Oklahoma residents for the 2011 tax year. Jean, who was legally blind, passed away on June 5, 2011. Prepare a 2011 Individual Income Tax Return for the taxpayers. Be sure that you use the proper forms for the date of the return. Selected personal information: James Jean Date of Birth January 31, 1942 July 4, 1961 Social Security Number 448-55-9998 448-55-9999 Presidential Election Campaign Fund No No Jean worked as a phone sales representative, and James lists his occupation “retired”. James and Jean have a son Adam, 6/1/99, SS# 448-55-1122. Adam lived with them all year and attended school. He has no income to report. Income and expenses as presented by James: 1) On August 15, 2011, James moved across the state of Oklahoma from Idabel, and meets both the distance and time tests requirements for deducting moving expenses. He drove his personal automobile 174 miles one way for the move and paid $12 in tolls while en route. He paid a moving company $1,452 to move his household goods from his old residence to the new residence. 2) James lists his current address as 100 N University Dr, Box 101, Edmond, OK 73034. His phone number is 405-974-2000. 3) James worked for Atlantic Coast Dining, Inc. in the dish room in Idabel, as a means of keeping busy until he decided to relocate for better employment opportunities for himself, and better education opportunities for Adam. 4) James’ W-2 (from Atlantic Coast) contained the following information: box 1 (wages) $15,234, box 2 (federal income tax withheld) $1,621, box 3 $15,234, box 4 $945, box 5 $15,234, box 6 $221, and box 17 (state income tax withheld) $610. 5) Jean worked for Institutional Operations Co. until she passed away. Her W-2 contained the following information: box 1, 3 & 5 $7,324, box 2 $350, box 4 $454, box 6 $106 & box 17 $125. 6) James received a 1099-INT reporting $14,000 in interest income from the Bank of America, NA. Jean cashed a jointly owned US EE Savings Bond at the Bank of America on May 2nd. She had a basis of $50 in the bond and received a total of $105 in the transaction. James owned several municipal bonds issued by the City of Dallas. He received a 1099-INT reporting a total of $572 in interest income. 7) James received a 1099-DIV reporting $7,685 in qualified dividends from AT&T stock that he has owned for more than 20 years. 8) James cashed in on retirement savings as follows: · Income from the Teachers’ Retirement System. His 1099-R reports a gross distribution of $12,567, with a taxable amount of $12,550. He had federal income tax withheld of $750 and state income tax withheld of $561. · He also received a 1099-R for a traditional IRA normal distribution showing a gross distribution of $8,275. He had federal income tax withheld of $428 and state income tax withheld of $49. The distribution code was 7. · For distributions from his ROTH IRA, he received a 1099-R for a qualified distribution with gross proceeds of $3,472. He had nothing withheld for state or federal income taxes on this transaction. He started this ROTH in 2001. 9) Shortly after Jean’s death, James found himself at the Shawnee Casino. After several free drinks, he hit it big and received a Form W-2G reporting winnings of $2,105 and federal and state income tax withholdings of $610 and $202 respectively. He was saddened to admit that he ended up losing $10,543.22 before the evening’s alcohol had worn off. He doesn’t understand why he’d get a W-2G when he feels he should be issuing a 1099-MISC to the casino instead for his evening of stupidity. 10) James also received a SSA-1099. Box 5 reported $15,751 in total benefits with Medicare premiums of $1,062 and $170 withheld for federal income tax purposes. James also served as a juror for one day but was dismissed by the judge when word arrived at the courthouse that Jean had passed away. He received $75 for one day’s jury duty pay and had $5 withheld for federal income taxes and $5 for state income taxes. 11) The state sent James a 1099-G reporting a state income tax refund of $576 for 2009. James and Jean did itemize on their 2010 tax returns and deducted state income taxes paid. Their itemized deductions in 2010 totaled $18,900, including $2,020 for state income taxes. 12) James sold the family home in Idabel (1021 S. Main, Idabel, OK 73046), before he moved for $575,000. James and Jean had paid $220,000 for the home in 1998 when they purchased it. They had made no capital improvements to the home. James then purchased a new home in Edmond for $275,000, closing on November 16, 2011. James and Adam rented the home prior to closing on it. They made rental payments for 2 months totaling $2,400. 13) After moving to his current residence, James established a neighborhood watch business for his neighborhood. His neighborhood association gave him a 1099-MISC reporting nonemployee compensation of $5,756 for “watch” services provided during 2010. He incurred the following expenses for this business endeavor: $672 in printing fees, $1,078 in supplies used, and $584 in telephone expenses. He also drove 1100 miles to carry out this activity patrol. 14) Ever the gambler, James tried his hand at investing in the stock market during 2011 as follows. · 1,500 shares of SYBR common stock on March 27, 2011 for $1,830 plus $23 in broker fees. He sold this stock on December 1, 2011 for $1,215 and paid another $23 in broker fees. · 1,000 shares of SNG common stock on January 28, 2007 for $1,500 plus $23 in broker fees. He sold those shares on December 20, 2011 for $1,420 and paid another $23 in broker fees. · 500 shares of SONC common stock on May 3, 2011 for $10,920 plus $23 in broker fees and sold them for on November 30, 2011 for $8,975 and paid another $23 in broker fees. · On May 1, 2011, Jean and James sold 25,600 shares of WMT common stock for $1,177,600. This was to help them pay some of the overwhelming medical bills. They paid a total of $246 in broker fees in the acquisition and disposition of the stock. Jean originally purchased the stock on March 20, 1980. She bought 100 shares of WMT’s common stock for $3,175. Stock splits have been very profitable. 15) James and Jean inherited some farmland in Nowheresville, Texas. They received rental income during 2011 of $4,900. Because they did not live near the property, they hired a REALTOR to manage the rental of the property. They paid the REALTOR $1,500 and paid $575 in property taxes. 16) In trying to find a cure for Jean’s illness, the Jones’ undertook several experimental treatments. Unfortunately, many of them were not covered by insurance. After insurance paid its portion of their medical expenses, they still paid $15,752 for prescription medications, $175,682 in doctor’s bills, $575,001 for hospital bills, and $1,724 for health insurance premiums on Jean. They traveled 2,175 miles for medical purposes during 2011, of which 1,998 was prior to July 1. 17) They paid $798 in property taxes on their joint Idabel primary residence, and then James incurred and paid $444 on his new Edmond residence after the move, made a cash contribution to their church of $125,282 (including $4,000 directly from his IRA – proper paperwork exists for this) and another cash contribution of $1,500 to the Indonesian Disaster Relief Fund in Nepal. They paid $430 during 2011 for the preparation of their 2010 income tax returns and $125 to rent a safety deposit box at a local bank for important papers including tax returns. Proper documentation exists for all of the above. 18) James spent $5,126 for eleven energy saving windows and $750 for three energy savings doors. He paid another $7,500 for the new windows and doors to be installed. Likewise, the central heat & air system went out at his new residence, so he spent another $7,000 on a new geothermal heat pump system and paid an additional $800 for it to be installed. He has the proper documentation for the items that qualify. 19) During the time that Jean lived in 2011, they hired a housekeeper to help maintain the housework while Jean was hospitalized so that James could spend more time with her. Their employer identification number is 73-2164586. They paid $3,800 in wages to the housekeeper and withheld $437 from her paycheck for federal income taxes. The housekeeper’s services were terminated on June 15, 2011. They paid unemployment taxes of $285 to the state of Oklahoma. All wages that were taxable under FUTA were also taxable for state unemployment purposes. 20) To try and meet new people in Edmond, James attended an art class at the local university spending $772 for tuition and related qualifying materials during the fall semester of 2011. He spent another $200 for books and supplies. 21) James and Jean made quarterly payments during 2011 that totaled $47,000 for federal and $16,500 for state taxes. Other: Assume that the tax return was prepared and filed by April 15, 2012. Your assignment is to prepare the federal income tax return for the taxpayers as if you were their paid preparer. The only form which you may deem necessary you do not need to complete is 2210. You cannot utilize any software to aid in the preparation of the tax return. Use of a software program will result in a grade of zero being awarded for the assignment. You may download and utilize any forms and worksheets available on the IRS’ website (www.irs.gov). You may utilize any publicly available resource for research on this assignment. Do not discuss your return with anyone else until after you have turned the assignment in to your instructor. You must include the worksheets and show supporting documentation for your tax return calculations. You should show the form and line number on the calculation sheet. For example – 1040 line 7 (x + y + z) = total reported on that line. If you do not, you will lose all of the points for that particular line on the assignment. Missing forms will immediately lose 5 points for each form that should be included that is not. The return needs to be assembled in proper IRS sequencing order. DO NOT include instructions and forms that are blank – I don’t need them and you don’t want me wasting time going through them – it makes for an unhappy instructor. This assignment must be in a 3-ring binder (no larger than 1”). Put the assignment in the following order (with dividers for each sections): Cover Page, Tax Form and schedules, and then supporting documentation. There are a couple of forms which do not have the 2011 form yet online. You may use the 2010 forms for these items (I have a list of which ones are not yet up, so I’ll know if you just failed to get the correct form), but be careful on line numbers as 2010 will not always match 2011 lines.