Question

Tax year 2017

Bob Jones
DOB: October 10, 1952 SSN: 444-00-4444 Marital Status: Single Home Address: 5100 Lakeshore Drive, Pensacola, FL 32502

Mandy’s personal tax information is as follows:

Mandy Jones DOB: June 30, 1990 SSN: 999-99-9999 Marital Status: Single Home Address: 5990 Langley Road, Pensacola, FL 3520

Business address:
210 Ocean View Drive in Pensacola, Florida.

Bob had $1,200,000 in taxable income.
Investments in land, stocks, and bonds, is about $14,000,000.
The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000.
The stocks and bonds have a tax basis of $1,200,000 and they are currently worth $5,000,000.
All of the investments have been owned for more than a year.
Last year, he reported interest income of $20,000 and dividend income of $6,000.
In addition to his investments, Bob paid $140,000 for his home in 1972 and it is now worth $600,000.

The used car business is currently valued at $53,000,000 including the land and building, which are worth $41,000,000. Bob’s tax basis in the land and building is $2,000,000 and $400,000, respectively. The inventory is worth $12,000,000, with a cost basis of $5,000,000; the remaining assets, which include office furniture and equipment, make up the remainder of the business’s total value. The office furniture and equipment are fully depreciated.

Instructions:

Prepare Bob’s Form 1040 with the appropriate tax schedules and Mandy’s Form 1040 (based on the salary he wanted to pay her, $70,000 per year). Assume that you are filing the tax returns using sole proprietorship for the business entity and treating Mandy as an employee, regardless of your initial recommendation for this client

Answer 1