Question

Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2021 Oakcrest Road, Boca Raton, FL 33431. Jane's Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential Election Campaign Fund. Jane had health insurance for all months of 2016. During 2016, Jane had the following income and expense items:

a.		$100,000 salary from Legal Services, Inc.
b.		$20,000 gross receipts from her typing services business.
c.		$700 interest income from Third National Bank.
d.		$1,000 Christmas bonus from Legal Services, Inc.
e.		$60,000 life insurance proceeds on the death of her sister.
f.		$5,000 check given to her by her wealthy aunt.
g.		$100 won in a bingo game.
h.		Expenses connected with the typing service:
		Office rent $7,000 Supplies 4,400 Utilities and telephone 4,680 Wages to part-time typists 5,000 Payroll taxes 500 Equipment rentals 3,000
i.		$9,500 interest expense on a home mortgage (paid to San Jose Savings and Loan).
j.		$15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2016. Jane had paid $14,000 for the silverware on July 1, 2007. She was reimbursed $1,500 by her insurance company.
k.		Jane had loaned $2,100 to a friend, Joan Jensen, on June 3, 2013. Joan declared bankruptcy on August 14, 2016, and was unable to repay the loan. Assume that the loan is a bona fide debt.
l.		Legal Services, Inc., withheld Federal income tax of $16,000 and the appropriate amount of FICA tax from her wages.
m.		Alimony of $10,000 received from her former husband, Ted Smith.
n.		Interest income of $800 on City of Boca Raton bonds.
o.		Jane made estimated Federal tax payments of $1,000.
p.		Sales taxes from the sales tax table of $946.
q.		Property taxes on her residence of $1,100.
r.		Charitable contribution of $2,500 to her alma mater, Citrus State College.
s.		on November 1, 2016, Jane was involved in an automobile accident. At the time of the accident, Jane's automobile had an FMV of $45,000. After the accident, the automobile's FMV was $38,000. Jane acquired the car at a cost of $52,000. Jane's car was covered by insurance, but because the policy had a $5,000 deduction clause, Jane decided not to file a claim for the damage.

Required:

Compute Jane Smith's 2016 Federal income tax payable (or refund due). Use Form 1040, Schedule A, Schedule C, Schedule D and Form 4684. (Note: There is a separate Form 4684 for each casualty or theft.)

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. However, unless instructed otherwise, use the minus sign to indicate a loss.

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.

Complete Jane Smith's Form 1040 for 2016. Use the minus sign to indicate a loss.

Form 1040 Department of the Treasury—Internal Revenue Service (99) U.S. Individual Income Tax Return 2016 OMB No. 1545-0074 IRS Use Only—Do not write or staple in this space. For the year Jan. 1–Dec. 31, 2016, or other tax year beginning ,2016, ending ,20 See separate instructions. Your first name and initial JANE Last name SMITH Your social security number 123-45-6789 If a joint return, spouse's first name and initial Last name Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. 2020 OAKCREST Apt. no. ? Make sure the SSN(s) above and on line 6c are correct. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). BOCA RATON FL 33431 Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. ? You    ? Spouse Foreign country name Foreign province/state/country Foreign postal code Filing status Exemptions6a Yourself.If someone can claim you as a dependent, do notcheck box 6a . . . . . . . . . . . . . . . . . . . . . . . . . . . .} Boxes checked on 6a and 6b No. of children on 6c who: • lived with you • did not live with you due to divorce or separation (see instructions) Dependents on 6c not entered above Add numbers on lines above ? bSpouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If more than four dependents, see instructions and check here. ? ? cDependents: (2) Dependent's social security number (3) Dependent's relationship to you(4) ? If child under age 17 qualifying for child tax credit (see instructions) (1) First name Last name dTotal number of exemptions claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions.	7	Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							7
	8a	Taxable interest. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							8a
	b	Tax-exempt interest. Do not include on line 8a . . . . . . . .				8b
	9a	Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							9a
	b	Qualified dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				9b
	10	Taxable refunds, credits, or offsets of state and local income taxes . . . . . . . . . . . . . . . . . .							10
	11	Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							11
	12	Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							12
	13	Capital gain or (loss). Attach Schedule D if required. If not required, check here . . . . . . ? ?							13
	14	Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							14
	15a	IRA distributions . . . . . . . . . .	15a			b	Taxable amount . . . . . .		15b
	16a	Pensions and annuities . . . . .	16a			b	Taxable amount . . . . . .		16b
	17	Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E. .							17
	18	Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							18
	19	Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							19
	20a	Social security benefits . . . . .	20a			b	Taxable amount . . . . .		20b
	21	Other income. List type and amount							21
	22	Combine the amounts in the far right column for lines 7 through 21. This is your total income ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							22

Adjusted Gross Income	23	Educator expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				23
	24	Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				24
	25	Health savings account deduction. Attach Form 8889 . . . . .				25
	26	Moving expenses. Attach Form 3903 . . . . . . . . . . . . . . . . .				26
	27	Deductible part of self-employment tax. Attach Schedule SE				27
	28	Self-employed SEP, SIMPLE, and qualified plans . . . . . . . .				28
	29	Self-employed health insurance deduction . . . . . . . . . . . . .				29
	30	Penalty on early withdrawal of savings . . . . . . . . . . . . . . . .				30
	31a	Alimony paid   b Recipient's SSN ?				31a
	32	IRA deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				32
	33	Student loan interest deduction . . . . . . . . . . . . . . . . . . . . .				33
	34	Tuition and fees. Attach Form 8917 . . . . . . . . . . . . . . . . . .				34
	35	Domestic production activities deduction. Attach Form 8903				35
	36	Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							36
	37	Subtract line 36 from line 22. This is your adjusted gross income . . . . . . . . . . . . .						?	37

Form 1040 (2016)

JANE

SMITH

123-45-6789

Page 2

Tax and Credits	38	Amount from line 37 (adjusted gross income)				38
	39a	Check if: { ? You were born before January 2, 1952, ? Blind. ? Spouse was born before January 2, 1952, ? Blind. } Total boxes checked ? 39a
Standard Deduction for— • People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions. • All others: Single or Married filing separately, $6,300 Married filing jointly or Qualifying widow(er), $12,600 Head of household, $9,300	b	If your spouse itemizes on a separate return or you were a dual-status alien, check here ? 39b ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	40	Itemized deductions (from Schedule A) or your standard deduction (see left margin) . .				40
	41	Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				41
	42	Exemptions. If line 38 is $155,650 or less, multiply $4,050 by the number on line 6d. Otherwise, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				42
	43	Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0-				43
	44	Tax (see instructions). Check if any from: a ? Form(s) 8814 b ? Form 4972 c ? ___				44
	45	Alternative minimum tax (see instructions). Attach Form 6251 . . . . . . . . . . . . . . . . .				45
	46	Excess advance premium tax credit repayment. Attach Form 8962 . . . . . . . . . . . . . . . .				46
	47	Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			?	47
	48	Foreign tax credit. Attach Form 1116 if required . . . . . . . . . . . .	48
	49	Credit for child and dependent care expenses. Attach Form 2441	49
	50	Education credits from Form 8863, line 19 . . . . . . . . . . . . . . . .	50
	51	Retirement savings contributions credit. Attach Form 8880 . . . .	51
	52	Child tax credit. Attach Schedule 8812, if required . . . . . . . . . . .	52
	53	Residential energy credit. Attach Form 5695 . . . . . . . . . . . . . . .	53
	54	Other credits from Form: a ? 3800 b ? 8801 c ?	54
	55	Add lines 48 through 54. These are your total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				55
	56	Subtract line 55 from line 47. If line 55 is more than line 47, enter -0- . . . . . . . . . . . . .			?	56
Other Taxes	57	Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				57
	58	Unreported social security and Medicare tax from Form: a ? 4137 b ? 8919 . . . . . . . . .				58
	59	Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required				59
	60a	Household employment taxes from Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				60a
	b	First-time homebuyer credit repayment. Attach Form 5405 if required . . . . . . . . . . . . . .				60b
	61	Health care: individual responsibility (see instructions)	Full-year coverage		?	61
	62	Taxes from: a ? Form 8959 b ? Form 8960 c ? Instructions; enter code(s) _ _ _ _ _ _				62
	63	Add lines 56 through 62. This is your total tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			?	63

Payments	64	Federal income tax withheld from Forms W-2 and 1099 . . . . . .				64
If you have a qualifying child, attach Schedule EIC.	65	2016 estimated tax payments and amount applied from 2015 return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				65
	66a	Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . .				66a
	b	Nontaxable combat pay election . .	66b
	67	Additional child tax credit. Attach Schedule 8812 . . . . . . . . . . .				67
	68	American opportunity credit from Form 8863, line 8 . . . . . . . .				68
	69	Net premium tax credit. Attach Form 8962 . . . . . . . . . . . . . . .				69
	70	Amount paid with request for extension to file . . . . . . . . . . . . .				70
	71	Excess social security and tier 1 RRTA tax withheld . . . . . . . . .				71
	72	Credit for federal tax on fuels. Attach Form 4136 . . . . . . . . . . .				72
	73	Credits from Form: a ? 2439 b ? Reserved c ? 8885 d ?				73
	74	Add lines 64, 65, 66a, and 67 through 73. These are your total payments . . . . . . . . . .						?	74
Refund	75	If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .							75
	76a	Amount of line 75 you want refunded to you. If Form 8888 is attached, check here ?						?	76a
Direct deposit? See instructions.	? b	Routing number X X X X X X X X X ? c Type:  ? Checking  ? Savings
	? d	Account number X X X X X X X X X X X X X X X X
	77	Amount of line 75 you want applied to your 2017 estimated tax ?				77
Amount You Owe	78	Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						?	78
	79	Estimated tax penalty (see instructions) . . . . . . . . . . . . . . . . .				79

Third Party Designee		Do you want to allow another person to discuss this return with the IRS (see instructions)? ? Yes. Complete below. ? No
		Designee's name	?	Phone no.	?	Personal identification number (PIN) ?

Sign Here Joint return? See instructions. Keep a copy for your records.		Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and accurately list all amounts and sources of income I received during the tax year. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
	?	Your signature	Date	Your occupation LEGAL SECRETARY	Daytime phone number
		Spouse's signature. If a joint return, bothmust sign.	Date	Spouse's occupation	If the IRS sent you an Identity Protection PIN, enter it here (see inst.)

Paid Preparer Use Only		Print/Type preparer's name	Preparer's signature	Date	Check ? if self-employed	PTIN
		Firm's name ?			Firm's EIN ?
		Firm's address ?			Phone no.
KIA	www.irs.gov/form1040				Form 1040 (2016)

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