Tax Return Project #1 SPRING 2016 - Jack Hastings (HE), age 65 and Kara Hastings (SHE)

FOR TAX YEAR 2015 (must use 2015 forms)

Jack Hastings (HE), age 65 and Kara Hastings (SHE), age 40, are married with three children: Mark Broke, age 17 and Nicole Broke, age 16, (her two children from a former marriage) and Laura, their 10 year old daughter. ALL children are full-time students. They also provide 100% support for Jack’s 85 year old mother, Mary Hastings (a citizen of France), who has lived full-time (as a resident) in a retirement home in Quebec, Canada for several years. Mary has no other sources of income. HE is the Vice President of the Premier Bank of San Marcos, Texas and receives an annual base salary of $185,000. Kara is Assistant Marketing Director for a national health food company in Austin and is paid an annual base salary of $65,000. The family resides at 111 College Ave., San Marcos, Hays County, TX, 78666. (all ages as of end of tax year; make up SS numbers as needed).

In addition to the above items, during the tax year the couple received the following:

$2,500 in qualified dividends on Apple, Inc. stock. Kara (SHE) received from her grandparents as a graduation present (college – May 2000). The value of the gift was $15,000 at that time and it has a current market value at the end of the year of $18,500.

Total of $500 in bond interest of which $250 was from a City of Boston, MA bond; the remainder was from an AT&T bond; they purchased both bonds several years ago. A total of $2,500 in interest from a savings account they hold jointly at Express Bank located in Windsor, Canada. The savings account has a balance of $150,000 in it at year end and represents Jack’s inherited funds (received in 2009) from his deceased father.

SHE received a bonus check for $50 from her employer in formal recognition of her 5 years of service to company (assume this amount is included in her W-2, BUT IS IN ADDITION TO HER BASE SALARY).

The bank provides HIM with a $250,000 group term life insurance policy. The bank provides all employees with this policy insurance policy equal to three times their annual salary or $250,000, whichever is less (assume that the taxable portion of this item was – incorrectly - not included in W-2 - and therefore will need to be added to “Line 7”) *Refer Pub 525 and/or IRS website for information on how to calculate any taxable portion.

SHE volunteers at a local IRS qualified non-profit organization. This organization presented her with a $125 check this year in recognition for her “best fund raising idea” – which netted the organization over $10,000 in additional funds. In addition, SHE has receipts accounting for $600 out of pocket expenses she incurred during the year – all associated with events she attended on behalf (as a representative) of the organization. She wonders if these expenses are deductible as charitable contributions – if so deduct them.

HE won $1,000 from a Texas Lotto game. He paid $250 total for several tickets and retained the receipts.

When HE chooses to work on Saturdays (not a typical work day for him), he elects to eat his meals at work (so that he can continue working rather than take a break) and has his meals picked up by other employees who are working that day - while on their lunch breaks. The annual value of these meals is $3,000 (he has receipts). He would like to have this expense deducted as unreimbursed employee business expenses if allowable.

The couple sold shares in two stocks during the past year: 150 shares of Amazon sold on July 1 for $155 per share; and 200 shares of Shell Oil sold on October 1 for $110 per share. Prior to the sale they owned 150 shares of Amazon which they purchased on February 1, 2015 for a total of $4,500, and 300 shares of Shell Oil which they purchased on May 31, 2009 for a total of $1,000. (Assume IRS is notified of basis by broker and Box D is checked on Form 8949).

Other itemized deductions that the couple tells you about (that they paid) for the tax year were unreimbursed medical expenses of $12,800 (which includes $6, 000 in premiums HE paid for his family’s group medical insurance and the remainder was what HE paid for his mother’s health insurance policy - his company only paid a portion related to him, not for the entire family); home mortgage interest of $8,500; real estate/property taxes on their home of $6,200; and multiple cash contributions to the American Cancer Society totaling $750 and $800 cash to the Salvation Army (they have all IRS required letters and receipts for the donations). Refer to Pub 17 and/or the IRS website to calculate the appropriate sales tax deduction.

They paid their CPA during 2015 for income tax services - $200 amending for their 2013 tax return, $400 for amending their 2014 tax return, and $300 for tax planning advice related to the 2015 tax year.

SHE received twelve monthly child support payments (for a total of $16,000) from her ex-husband Ralph Broke.

HER employer withheld $7,500 in Federal income taxes on HER salary. HIS employer withheld $38,000 in Federal income tax on HIS salary. Assume the two employers both withheld the proper amount of FICA taxes. The couple made no estimated tax payments and no overpayments from 2014 were applied to 2015.