Question

Without a Critical Thinking Assignment this week, this is your opportunity (and a requirement!) to work on your Portfolio Project. Obtain the supporting information from the option you have chosen to complete for your Portfolio Project. You will also use the Schedule E template included under that same option.

Show all calculations within the cells of the template. This means that you must use formulas and links so that your thought process can be examined. Make good use of comments to convey your thought process as well. No hard coding of solutions is allowed. In addition, complete the depreciation schedule showing the list of assets for the rental properties as well as the depreciation rates and amounts. Submit a single MS Excel file for grading.

Case:

Brian and Sheila Williams were married in October of 2008. They live at 1000 Main Street, Atlanta, GA 33127. Brian is a postal service worker. Sheila is a teacher at Grady High School. Brian’s social security number is 555-11-1111 and Sheila’s social security number is 555-22-2222. They have a dependent daughter Jayla who is 10 years old (Born on May 12th). Jayla’s social security number is 555-33-3333. In 2016, Brian's wages was $45,860 while Sheila's was $43,590.

Included or Excluded Items

Reasoning for Including or Excluding and if Including, Indicate amount to include

Two years ago, the taxpayer loaned a friend $2000. The friend has filed for bankruptcy this year and will not be able to repay

Earned $100 interest on county municipal bonds

Found a diamond worth $1000 on the ground

Received $500 in death benefits fron Brian's father

Received $4,000 court settlement. $1,000 was punitive damanges.

Brian paid $400/month in child support

Received a $1000 gift from his brother

Sheila won $100 playing bingo

Brian paid $200/month in alimony to his ex-wife

Sheila received a $1000 gift from her mother

Sheila spent $300 on supplies for her classroom

Portfolio Investments

Stock

Acquired

Sold

Sales Price

Cost (Basis)

Qualified Dividends

Red Stock

2/1/2016

10/5/2016

$6,000

$2,500

$0

White Stock

6/11/2009

10/15/2016

$5,000

$4,000

$100

Blue Stock

10/1/2005

8/3/2016

$2,000

$10,000

$0

Black Stock

3/6/2016

12/15/2016

$3,000

$5,000

$0

Yellow Stock

4/5/2006

N/A

N/A

$5,000

$300

Interest Income Source

Amount

Money Market Account

$200

Savings Account

$25

State Municipal Bonds

$35

Rental Property

They own and rent two pieces of residential real estate in Miami, FL. These properties were acquired with cash (so there are no mortgages on the homes). They both have real estate broker licenses in Georgia and Florida. They dedicate enough hours (through their business) to qualify as a “real estate professional” with regard to these properties.

Property 1

The first property is located at 17750 NW 17th Ave, Miami, FL. They collect $1,000 monthly in rent. The property was purchased June 30, 2016 for $150,000. The tax records show that the value of the land is $30,000 and the value of the home was $90,000 when purchased. They actively participate in the management of the real property.

The property has the following expenditures:

Property tax

$7,000/yr

Repairs

$   900/yr

Insurance

$1,200/yr

Washing Machine

$300

(purchased 6/2/2015)

Refrigerator

$700

(purchased 7/1/2016)

Furniture

$2,000

(purchased 4/1/2014)

Property 2

The second property is located at 5610 NW 11th Ave, Miami, FL. They collect $1,500 monthly in rent. The property was purchased on June 12, 2016 for $100,000. The tax records show that the value of the land is $20,000 and the value of the home was $80,000 when purchased. They actively participate in the management of the real property.

The property has the following expenditures:

Property tax

$6,200/yr

Repairs

$3,000/yr

Insurance

$1,200/yr

Legal fees

$   500/yr

Advertising Expense

$   500/yr

Templet:

SCHEDULE E (Form 1040) Department of the Treasury Internal Revenue Service (99)			Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.) ? Attach to Form 1040, 1040NR, or Form 1041. ? Information about Schedule E and its separate instructions is at www.irs.gov/schedulee.												OMB No. 1545-0074
															2016 Attachment Sequence No. 13
Name(s) shown on return												Your social security number
Part I		Income or Loss From Rental Real Estate and Royalties Note. If you are in the business of renting personal property, use
Schedule C or C-EZ (see instructions). If you are an individual, report farm rental income or loss from Form 4835 on page 2, line 40.
A Did you make any payments in 2016 that would require you to file Form(s) 1099? (see instructions)														Yes			No
B If “Yes,” did you or will you file required Forms 1099?														Yes			No
1a	Physical address of each property (street, city, state, ZIP code)
A
B
C
1b	Type of Property (from list below)			2   For each rental real estate property listed above, report the number of fair rental and				Fair Rental Days			Personal Use Days					QJV
A	7			only if you meet the requirements to file as a qualified joint venture. See instructions.			A	365			0
B	7						B	365			0
C							C
personal use days. Check the QJV box
Type of Property:
1 Single Family Residence
2 Multi-Family Residence
3 Vacation/Short-Term Rental
4 Commercial
5 Land
6 Royalties
7 Self-Rental
8 Other (describe)
Income:				Properties:		A				B					C
3    Rents received .   .   .   .   .   .   .   .   .   .   .   .   .					3	12000				18000
4    Royalties received .   .   .   .   .   .   .   .   .   .   .   .					4	0				0
Expenses: 5     Advertising    .   .   .   .   .   .   .   .   .   .   .   .   .   . 6     Auto and travel (see instructions)   .   .   .   .   .   .   . 7     Cleaning and maintenance   .   .   .   .   .   .   .   .   . 8     Commissions.    .   .   .   .   .   .   .   .   .   .   .   .   . 9     Insurance .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 10     Legal and other professional fees .   .   .   .   .   .   . 11     Management fees .   .   .   .   .   .   .   .   .   .   .   . 12     Mortgage interest paid to banks, etc. (see instructions) 13     Other interest.   .   .   .   .   .   .   .   .   .   .   .   .   . 14     Repairs.   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 15     Supplies   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 16     Taxes .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 17     Utilities .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 18     Depreciation expense or depletion .   .   .   .   .   .   . 19      Other (list) ?                                                                                                  20     Total expenses. Add lines 5 through 19 .   .   .   .   . 21     Subtract line 20 from line 3 (rents) and/or 4 (royalties). If result is a (loss), see instructions to find out if you must file Form 6198   .   .   .   .   .   .   .   .   .   .   .   .   . 22     Deductible rental real estate loss after limitation, if any, on Form 8582 (see instructions)    .   .   .   .   .   .   .					5	0				500
					6	0				0
					7	0				0
					8	0				0
					9	1200				1200
					10	0				500
					11	0				0
					12	0				0
					13	0				0
					14	900				3000
					15	0				0
					16	7000				6200
					17	0				0
					18	3873				2909
					19
					20	12973				13859
					21	-973				4141
					22	(			)	(			)		(			)
23a   Total of all amounts reported on line 3 for all rental properties     .   .   .   . b   Total of all amounts reported on line 4 for all royalty properties    .   .   .   . c   Total of all amounts reported on line 12 for all properties    .   .   .   .   .   . d   Total of all amounts reported on line 18 for all properties    .   .   .   .   .   . e   Total of all amounts reported on line 20 for all properties    .   .   .   .   .   .									23a	30000
									23b	0
									23c	0
									23d	6782
									23e	26832
24     Income. Add positive amounts shown on line 21. Do not include any losses    .   .   .   .   .   .   . 25     Losses. Add royalty losses from line 21 and rental real estate losses from line 22. Enter total losses here 26     Total rental real estate and royalty income or (loss). Combine lines 24 and 25. Enter the result here. If Parts II, III, IV, and line 40 on page 2 do not apply to you, also enter this amount on Form 1040, line 17, or Form 1040NR, line 18. Otherwise, include this amount in the total on line 41 on page 2 .   .   .   .													24		4141
													25		(973			)
													26		3168
For Paperwork Reduction Act Notice, see the separate instructions.                             Cat. No. 11344L                                   Schedule E (Form 1040) 2016

Answer 1

Included	Excluded	Gross Income
-	Two years ago, the taxpayer loaned a friend $2000. The friend has filed for bankruptcy this year and will not be able to repay	$         -
-	Earned $100 interest on county municipal bonds	$         -
Found a diamond worth $1000 on the ground	-	$ 1,000
	Received $500 in death benefits from Brian's father	$         -
Received $4,000 court settlement. $1,000 was punitive damages.	-	$ 1,000
Brian paid $400/month in child support	-	$ 4,800
	Received a $1000 gift from his brother	$         -
Sheila won $100 playing bingo	-	$     100
-	Brian paid $200/month in alimony to his ex-wife	$         -
-	Sheila received a $1000 gift from her mother	$         -
-	Sheila spent $300 on supplies for her classroom	$         -
		$ 6,900

Column A Column B

Deductible Items: To be appeared on Form 1040

1. Loan - $2000 NA

2. Child Support - $4800 per year No.28 (Other Miscellaneous Deductions)

3. Alimony - $ 2400 No.28 (Other Miscellaneous Deductions)

4. Supplies to Class room - $300   No.21 (Unreimbursed employee expenses)

5. Capital Loss (Blue Stock)- $8000 NA

6. Capital Loss (Black Stock) - $2000 NA

7. Property Tax(Property 1) - $7000   No.7 (Property taxes)

8. Repairs (Property 1)- $900   No.28 (Other Miscellaneous Deductions)

9. Insurance (Property 1)- $1200 No.28 (Other Miscellaneous Deductions)

10. Property Tax(Property 2) - $6200 No.7 (Property taxes)

11. Repairs (Property 2)- $3000   No.28 (Other Miscellaneous Deductions)

12. Insurance (Property 2)- $1200 No.28 (Other Miscellaneous Deductions)  

13. Legal Fees (Property 2) - $500   No.28 (Other Miscellaneous Deductions)

14. Advertising Expense(Property 2) - $500 No.28 (Other Miscellaneous Deductions)