Question

Tax Return Project FORM 1040

Facts:

James Reynolds (SSN 434-44-4300){DOB 06-20-1969} and Carol Reynolds (SSN 433-43-4400) [DOB 03-18-1972] are husband and wife and file a joint return. They live at 7843 Campus Road, Sacramento, CA 95823. They fully support their daughter Alicia (SSN 435-45-45000 [DOB 04-16-1996] who attends UC Davis full-time as a medical student. They also have a son Joseph (SSN 436-46-4600) [DOB 03-02-2000]. James and Carol furnish all of the support of Grace (Carol's grandmother) (SSN 437-47-4700) [DOB 01-30-1937] and lives in an assisted living facility

Alicia recieves a $3,540 scholarship covering her room and board.

James recieved a W-2 from Quality Products Inc. [93-5632988 federal id and state id 356-4395-1] 1801 18th street, Sacramento, CA 95824

Gross Wages	$125,000.00
Federal Income Tax WIthheld	16,650.00
Social Securtiy Tax	4,485.60
Medicare Tax Withheld	1,812.50
State Income Tax Withheld	6,385.00
SDI WIthheld	960.68

Interest Income:
Bank of America	$ 975
State of California interest on income tax refund	15
State of Georgia Bonds	435
Sacramento City school bonds	845
Interest from US Treasury bonds	320
Dividends:
Alpha Mutual Fund (qualifying dividends of 1,500 included)	2,250
Bayer Company (all are qualifying dividends)	750
2015 federal income tax refund recieved in 2017	2,750
2015 state income tax refund recieved in 2017	325
[They itemized in 2015 and 2016]
California lottery winnings	1,500
Texas lottery winnings	750
Casino slot winnings	5,250
Unemployment compensation - Carol	17,350

Mortgage interest on personal residence	$16,250
Interest on motor home	4,345
Doctors fees for cosmetic surgery	7,500
Dentist fees	2,500
Prescribed vitamins	120
Medical insurance	9,450
Property taxes	5,450
DMV fees on motor home [tax portion]	1,250
DMV fees on family auto [tax portion]	525
Doctor bills for grandmother	3,200
Hospital bills for grandmother	11,500
Wheelchair for grandmother	125
Property taxes on boat	675
Interest on personal credit cards	435
Interest on loan to buy school bonds	225
Interest on loan to buy stocks	300
Cash contributions to church	5,000
Cash contributions to homeless family	25
Gambling losses	6,500
Contributions of furniture to Goodwill - cost basis	7,500
Contrtibutions of furniture to Goodwill - fair market value	650
Tax return preparation fee	650

The family had health insurance coverage for the current tax year

Goodwill address is 8735 Cosumnes River Parkway, Sacramento, CA 95823

Required:

Prepare 2017 Federal and California income tax returns including all appropriate forms and schedules. They do not want to contribute to the presidential election campaign and do not want to be a third party designee.

For any missing information, make reasonable assumptions and then document them when submitting the return.

Answer 1

Alicia recieves a $3,540 scholarship covering her room and board.

I assumed that scolarship is fully utilised for her qualified tuition and related espenses. So, that amount setoff or nill.

Interest on personal credit card is not deductible. So, we have not considered $450.