Question

Janice Morgan, age 24, is single and has no dependents. Janice works as an employee from

Worldwide Publishing and also as a freelance writer. In January 2019, Janice opened her own

office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her freelance writing

business Writers Anonymous (self employed). Both Writers Anonymous and Janice operate on

the cash basis. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security

number is 123-45-6789.

Self Employed Information:

Income from sale of articles 75,000

Rent

13,500

Utilities

7,900

Supplies

1,800

Insurance (business liability) 5,000

Travel (assume fully deductible) 2,300

Meals (while on business travel) 600

Meals (while meeting with clients) 600

Country Club (Used to entertain clients) 4,000

Client entertainment expenses 1,000

Personal items:

Wages from Worldwide Publishing $110,000

Interest from checking account from First Bank 4,000

Home mortgage interest paid to First Bank 10,000

(Secured by principal residence, acquisition debt)

Home Equity Line of Credit 3,000

(Secured by principal residence, used to pay off credit cards)

Property taxes on personal residence 4,000

Charitable contributions 10,700

Federal income tax withholding 26,000

State income tax withheld 8,500

During the year, Janice invested $10,000 (tax basis and at-risk basis) into XYZ limited

partnership (a passive investment). Her share of the limited partnership income for the year was

$6,000, and Janice received a $5,000 distribution from XYZ limited partnership.

During the year, Janice also invested $6,000 (tax basis and at-risk basis) into ABC limited

partnership (a passive investment). Her share of the limited partnership loss for the year was

$7,000, and Janice received a $1,500 distribution from ABC limited partnership.

In 2012 Janice started DEF Corporation (a small private C corporation) by contributing $40,000.

She was the only owner. During the year Janice sold her complete investment for $30,000.

Additionally, Janice had:

(1) Janice made a $6,000 contribution to her traditional IRA account. Her employer,

Worldwide publishing, offers a 401k that Janice contributes to.

(2) Sale of LMN publically traded stock on 8/15/2019 for $11,000 (originally purchased for

$4,000 on 1/15/2015)

(3) Sale of QRS publically traded stock on 10/15/2019 for $2,000 (originally purchased for

$6,000 on 12/15/2018)

(4) Sale of a boat on 5/15/2019 for $10,000 used for personal recreation (originally

purchased for $20,000 on 6/15/2014)

(5) Janice inherited publically traded stock worth $30,000 from a deceased uncle on

September 30, 2019

(6) Immediately after receiving this stock, Janice sold it for $30,000. This stock was

originally purchased by his uncle on January 15th, 2016 for $23,000

Prepare the 2019 Federal income tax return for Janice Morgan.

Answer 1

Federal Income tax Return For Janica

R

Income from sale of articles (a)	75,000
Rent 13,500 Utilities 7,900 Supplies 1,800 Insurance (business liability) 5,000 Travel (assume fully deductible) 2,300 Meals (while on business travel) 600 Meals (while meeting with clients) 600 Country Club (Used to entertain clients) 4,000 Client entertainment expenses 1000 Total Expense b)	36700
Profit c= (a-b)	38,300
Othe Incmoe for world wide wages    d Employer Contribution Received	110000 6000
Interest from checking account from First Bank e	4,000
Other Income from invested other business f (wn-1)	33500
Total Income g = (c+d+e+f)	1,91,800
Expenses allowed for deduction
Home mortgage interest paid to First Bank 10,000
Home Equity Line of Credit 3,000
Property taxes on personal residence 4,000	17,000
Net Profit	1,74,800
Federal income tax withholding 26,000 State income tax withheld 8,500	34500
Net Taxable amount	140300

Note Charitable donation not allowed for deduction

Wn -1

Particular	XYZ	C corporation	Abc	Net Position
Invested Amount	10000	40000	6000 Invested
Return On Investment	+5000	30000	1500 losss	33500

Investment Sale Value	Investment Purchase Value	Net Profit / loss
11000	4000	6000
2000	6000	-4000
10000	20000	-10000
30000	23000	7000
Net Profit / Loss		-1000

received from employer