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Appendix E Solution Essay

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Problem 1 – David R. and Sheri N. Johnson – Individuals (Form 1040) E-1 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E-2 SWFT 2014: Comprehensive Volume/Solutions to Appendix E © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. David R. and Sheri N. Johnson—Individual Income Tax Return E-3 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E-4 SWFT 2014: Comprehensive Volume/Solutions to Appendix E © …show more content…

All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E-20 SWFT 2014: Comprehensive Volume/Solutions to Appendix E © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. David R. and Sheri N. Johnson—Individual Income Tax Return E-21 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E-22 SWFT 2014: Comprehensive Volume/Solutions to Appendix E Notes to Problem 1, David R. and Sheri N. Johnson – Individuals [References correspond to the number used in the fact pattern.] 1. David is self-employed and reports his business income on Schedule C. Both his consulting fees of $92,800 and his expense reimbursements of $20,420 should be included on Line 1. The travel expenses are deducted on Line 24a [airfare $8,200 + lodging $5,200 + transportation $920] and $3,050 of meals are deducted on Line 24b [meals $6,100 – disallowed portion (50%  $6,100)]. 2. Given that David is a cash-basis taxpayer, the $4,400 payment received from Sesa Mining in 2012 is also included on Schedule C. This brings the total on Line 1 to $117,620 [$92,800 + $4,400 + $20,420]. The $5,100 received from Echo will be taxable in 2013. The Cormorant Mining

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