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 2016, Janice opened her own

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

business Writers Anonymous. 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. During 2016, Janice reported the following income and expense items connected with her

business Writers Anonymous (a sole proprietorship):

Income from sale of articles 50,000

Rent 16,500

Utilities 7,900

Supplies 1,800

Insurance 5,000

Travel (assume fully deductible) 2,300

Meals 1,200

Social Club (Used to entertain clients) 4,000

Janice has the following personal items:

Wages from Worldwide Publishing $100,000

Interest from checking account from First Bank 4,000

Home mortgage interest paid to First Bank 7,000

Property taxes on personal residence 2,000

Charitable contributions 1,700

Federal income tax withholding 25,000

State income tax withheld 7,500

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

$5,000, and Janice received a $1,000 distribution from XYZ limited partnership.

During the year, Janice also invested $2,000 (tax basis and at-risk basis) into ABC limited

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

$3,000. Because ABC limited partnership lost money during the year there were no distributions

paid to partners.

Compute Janice Morgan's 2016 Federal Income Tax Return Using Form 1040 Schedule A & Schedule C

Answer 1