Question

Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.

The following information is shown on Beth’s 2016 Wage and Tax Statement (Form W–2).

Line	Description	Amount
1	Wages, tips, other compensation	$65,000.00
2	Federal income tax withheld	10,500.00
3	Social Security wages	65,000.00
4	Social Security tax withheld	4,030.00
5	Medicare wages and tips	65,000.00
6	Medicare tax withheld	942.50
15	State	Arizona
16	State wages, tips, etc.	65,000.00
17	State income tax withheld	1,954.00

Other 2016 transactions include the following.

Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099-INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth's dividend payments on a Form 1099-DIV.

Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2016. On her 2015 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.

Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.

On February 8, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.

Beth bought a used sport utility vehicle for $6,000 on June 5. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, she sold the vehicle to a friend for $6,500.

On January 2, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19 for $55 a share.

Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenditures in connection with her software development business.

Cost of personal computer (100% business use)	$7,000
Cost of printer (100% business use)	2,000
Furniture	3,000
Supplies	650
Fee paid to computer consultant	3,500

Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15 and used 100 percent in her business.

Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.

Beth paid $300 for prescription medicines and $2,875 in physician interest to credit card bills and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage at Valley National Bank was $3,845, and interest paid to credit card companies totaled $320.

Beth contributed $2,080 to various qualified charities during the year. Professional dues and subscriptions totaled $350.

Beth paid $1,000 in estimated Federal income taxes throughout the year. She was covered for the entire year by Mesa Manufacturing’s health insurance policy.

Required:

Compute the 2016 net tax payable or refund due for Beth R. Jordan. You will need Forms 1040, 2106, and 4562 and Schedules A, B, C, D, and SE and the Qualified Dividends and Capital Gain Tax Worksheet.

Make realistic assumptions about any missing data.

If an amount box does not require an entry or the answer is zero, enter "0".

Enter all amounts as positive numbers, unless instructed otherwise.

It may be necessary to complete the tax schedules before completing Form 1040.

When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.

Use the 2016 Tax Rate Schedule provided. Do not use the Tax Tables.

Schedule A

Complete Beth's Schedule A for 2016.

SCHEDULE A (Form 1040) Department of the Treasury Internal Revenue Service (99) Itemized Deductions ? Information about Schedule A and its separate instructions is at www.irs.gov/schedulea. ? Attach to Form 1040. OMB No. 1545-0074 2016 Attachment Sequence No. 07 Name(s) shown on Form 1040 BETH R JORDON Your social security number 123-45-6789 Medical and Dental Expenses Caution. Do not include expenses reimbursed or paid by others. 1 Medical and dental expenses (see instructions) . . . . . . . . . . 1 2 Enter amount from Form 1040, line 38 . . . . . . . . . . . . 2 3 Multiply line 2 by 10% (10.10). But if either you or your spouse was born before January 2, 1952, multiply line 2 by 7.5% (0.075) instead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . . . 4 Taxes You Paid 5 State and local (check only one box): a  ? Income taxes, or } . . . . . . . . . . . . . . . . . . . . . . 5 b  ? General sales taxes 6 Real estate taxes (see instructions) . . . . . . . . . . . . . . . . . . . 6 7 Personal property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Other taxes. List type and amount ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8 9 Add lines 5 through 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Interest You Paid Note. Your mortgage interest deduction may be limited (see instructions). 10 Home mortgage interest and points reported to you on Form 1098 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 Home mortgage interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 11 12 Points not reported to you on Form 1098. See instructions for special rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Mortgage insurance premiums (see instructions) . . . . . . . . . 13 14 Investment interest. Attach Form 4952 if required. (See instructions.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Add lines 10 through 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Gifts to Charity If you made a gift and got a benefit for it, see instructions. 16 Gifts by cash or check. If you made any gift of $250 or more, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 Other than by cash or check. If any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 . . . . . 17 18 Carryover from prior year . . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 Add lines 16 through 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Casualty and Theft Losses 20 Casualty or theft loss(es). Attach Form 4684. (See instructions.) . . . . . . . . . . . . . . . . . . . . 20 Job Expenses and Certain Miscellaneous Deductions 21 Unreimbursed employee expenses—job travel, union dues, job education, etc. Attach Form 2106 or 2106-EZ if required. (See instructions.) ? 21 22 Tax preparation fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 23 Other expenses—investment, safe deposit box, etc. List type and amount ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 23 24 Add lines 21 through 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 25 Enter amount from Form 1040, line 38 . . . . . . . . . . . . 25 26 Multiply line 25 by 2% (0.02) . . . . . . . . . . . . . . . . . . . . . . . . 26 27 Subtract line 26 from line 24. If line 26 is more than line 24, enter -0- . . . . . . . . . . . . . . 27 Other Miscellaneous Deductions 28 Other—from list in instructions. List type and amount ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 28 Total Itemized Deductions 29 Is Form 1040, line 38, over $155,650? ? No. Your deduction is not limited. Add the amounts in the far right column for lines 4 through 28. Also, enter this amount on Form 1040, line 40. } . . . . . . . 29 ? Yes. Your deduction may be limited. See the Itemized Deductions Worksheet in the instructions to figure the amount to enter. 30 If you elect to itemize deductions even though they are less than your standard deduction, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?    ? KIA For Paperwork Reduction Act Notice, see Form 1040 instructions. Schedule A (Form 1040) 2016

2016 Tax Rate Schedules

Use the 2016 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables.)

2016 Tax Rate Schedules
Single—Schedule X											Head of household—Schedule Z
If taxable income is: Over—		But not over—		The tax is:				of the amount over—			If taxable income is: Over—		But not over—		The tax is:				of the amount over—
$0		$9,275		. . . . . .		10%		$0			$0		$13,250		. . . . . .		10%		$0
9,275		37,650		$927.50	+	15%		9,275			13,250		50,400		$1,325.00	+	15%		13,250
37,650		91,150		5,183.75	+	25%		37,650			50,400		130,150		6,897.50	+	25%		50,400
91,150		190,150		18,558.75	+	28%		91,150			130,150		210,800		26,835.00	+	28%		130,150
190,150		413,350		46,278.75	+	33%		190,150			210,800		413,350		49,417.00	+	33%		210,800
413,350		415,050		119,934.75	+	35%		413,350			413,350		441,000		116,258.50	+	35%		413,350
415,050		. . . . . .		120,529.75	+	39.6%		415,050			441,000		. . . . . .		125,936.00	+	39.6%		441,000
Married filing jointly or Qualifying widow(er)—Schedule Y-1											Married filing separately—Schedule Y-2
If taxable income is: Over—		But not over—		The tax is:				of the amount over—			If taxable income is: Over—		But not over—		The tax is:				of the amount over—
$0		$18,550		. . . . . .		10%		$0			$0		$9,275		. . . . . .		10%		$0
18,550		75,300		$1,855.00	+	15%		18,550			9,275		37,650		$927.50	+	15%		9,275
75,300		151,900		10,367.50	+	25%		75,300			37,650		75,950		5,183.75	+	25%		37,650
151,900		231,450		29,517.50	+	28%		151,900			75,950		115,725		14,758.75	+	28%		75,950
231,450		413,350		51,791.50	+	33%		231,450			115,725		206,675		25,895.75	+	33%		115,725
413,350		466,950		111,818.50	+	35%		413,350			206,675		233,475		55,909.25	+	35%		206,675
466,950		. . . . . .		130,578.50	+	39.6%		466,950			233,475		. . . . . .		65,289.25	+	39.6%		233,475

Answer 1

Calculation of Income Tax Payable
Particulars	Detail	Amounts($)	Working
Salary		65000
Interest on saving	1300
interest from bank	400
Dividend from B stock	800
Dividend from g stock	750
dividend from o stock	650	3900
State income tax refund		1100
short term cap. Gain		1200	Working note 1
bussiness income		19800
Gross income		91000
less-: Deductions
bussiness expenses		-16750	working note 3
Self employment tax deduction		-216	working note 4
Adjusteed gross total income		74034
less-: from deduction
itemized deductions or standred deduction whichever is grater		-9834	working note 5
Personal and dependency exemption deduction		3900	working note 6
Taxable income		60300
Tax		10784	working note 7
self employed tax		431	working note 8
Total Tax liablity		11215
Less-: Tax withholding by emplooyer		10250
Estimated taxes		1000
Net tax payable		285

Particulars	No. of shares	sales price	Total sales($)
	(A)	(B)	(A)x(B)
Corporation G	500	14	7000
Sport utility vehicles			6500
Corporation B	100	55	5500
Total		(E)	19000
PaRticulars	No.of shares	Purchase cost	total puirchase($)
	©	(D)	(C )x(D)
Corporation G	500	17.6	8800
Sport utility vehicles			6000
Corporation B	100	30	3000
Total		(F)	17800
NET short term cap gain		(E)-(F)	19000-17800 =1200

Working note -:3
Particulars	Amounts($)
Cost of personal computer (100% business use)	7,000
Cost of printer (100% business use)	2000
furnitures	3000
supplies	650
Fee paid to computer consultant	3500
Processing fees	600
Total business expenses	16750

working note 4
Computation of self assesment tax deduction
step 1- Compute earnings-
Detail	Amount($)
Business income	19800
Business expenses	16750
earnings	3050
step - excess of security portion over FICA
Particulars	amounts($)
Social security ceiling	113700
less-: weges	65000
Net ceiling	48700
step 4-. Medicare tax lsser step 2 or 3
medicare tax=Net employed incomex tax rate
2817x2.9% = $82
step 5- toatl self employed tax
social security tax =	349
medicare tax	82
self employed tax	431
step 6- self employed tax deduction amount
self employed tax x 50%
$431x50%=$216