The following facts are available to help prepare Kelly and Chanelle Chambers U. S. Federal Individual Income Tax Return for their 2020 tax year. Kelly and Chanelle Chambers ages 47 and 45 are married and live at 584 Thoreau Drive Durant Oklahoma 74701. Kellys Social Security number is 254- 93-9483 and Chanelles is 374-48-2938. The Chambers have two children: Emma age 23 and Chet age 18. Their Social Security numbers are 385-64-8496 and 385-68-9462 respectively. Emma is a single full-time college student and earned $8000 during the summer. Kelly and Chanelle help Emma through school by paying for her room board and tuition. Emma lives at home during the summer. Chet is also single has a physical handicap (but is not permanently disabled) and lives at home. He attends a local university on a full-time basis and earned $4000 working part-time for a marketing firm. In sum Kelly and Chanelle provide more than 50% of both Emmas and Chets total support for the year. Neither child provided more than one-half of his or her own support. If required both children will file their own tax returns. Kelly is a commercial pilot for a small regional airline Westward Travels. His salary is $155000 from which $17000 of federal income tax and $8000 of state income tax were withheld. Kelly also pays premiums for health disability and life insurance: $2000 of the premium was for health insurance $250 for disability and $400 for life insurance. Kellys father passed away during the year. Kelly and Chanelle received $150000 from the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums. Chets physician recommended that he see a physical therapist to help with his disability. Kelly paid the therapist $7000 during the year because their insurance would not cover the bills. Kelly also paid $2000 in dentist expenses for the family and $800 for eyeglasses for Emma. They have no medical mileage and no medical insurance reimbursements. On October 17 2018 Kelly and Chanelle went to the Choctaw Casino in Broken Bow Oklahoma and won $5000 at the blackjack table. The next night they lost $6000 at the slot machines. They have receipts for both their wins and losses. Kelly and Chanelle gave $1000 cash to the First Church of Durant OK during the year. They also had the following other income and expenses: Second Income Tax Return Project – Acct 3315 -003 (Spring Semester 2021) – Page 4 ● Real estate taxes on their personal residence $12000 ● Property taxes on cars (determined by value) $700 ● Home mortgage interest (home purchased in 2017; mortgage balance at end of year: $700000) $9000 ● Personal Credit card finance charges $4300 ● Tax return preparation fees ($600 is allocable to Chanelles business) $1200 ● Sales tax on major purchases during the year $6300 ● Interest income from a Bank of Durant savings account $900 ● Interest income from City of Durant Bonds $800 ● Dividend income (Qualified and Ordinary) from 3M stock $1500 Chanelle owns Chamber Networks (EIN 74-1234567) a cash-basis sole proprietorship that does network consulting. The business premises are located at 2301 Walden Way Durant Oklahoma 74701. During the year Chanelles gross revenues were $75000. She incurred the following expenses in her business during 2020: ● Business Insurance $900 ● Rent payments $2500 ● Telephone/cable expense $1000 ● Utility expense $500 ● Software rental $5400 ● Business journals and magazines $150 ● Training seminars $1200 ● Supplies $1100 ● Donations to a national political campaign fund $700 ● Estimated federal income tax payments $5000 ● Estimated state income tax payment $1000 In her office she has computer equipment of $10000 and office furniture and fixtures of $15000 all of which was purchased in November 1 2019. She elected to expense these assets immediately rather than depreciating them. She has no employees. On August 1 2020 a tornado passed over Durant. Kelly’s sports car was completely destroyed during the storm when a tree fell on it. At the time of the tornado the car had a FMV of $90000 with a cost of $60000 (purchased on September 1 2018). Although an insurance claim was filed the insurance company did not reimburse Kelly. The tornado was declared a federal disaster. FEMA disaster declaration number: AB-1235. Complete Form 1040 and accompanying schedules for Kelly and Chanelle’s federal income tax return for 2020 year. Use all rates deductions expense credits etc. that are applicable for 2020. Ignore any Alternative Minimum Tax Additional Medicare Tax Net Investment Income Tax and penalties. Using the information provided prepare a 2020 U.S. Individual Federal Income Tax Return for Kelly and Chanelle Chambers. Include: Form 1040 Schedule 1 – Form 1040 Schedule 4 – Form 1040 Schedule 5 – Form 1040 Schedule A (Form 1040) Schedule B (Form 1040) Schedule C (Form 1040) Schedule SE (Form 1040) Form 4684 Form 8995 Tax Computation Worksheet (worksheet as to how tax was computed – no special form is required) Notes to Tax Return (list any items in the problem either not used or only partially used with an explanation) Note: No other forms are to be turned in. Ignore any Alternative Minimum Tax Additional Medicare Tax Net Investment Income Tax Qualified Business Income Deduction credits and penalties ‘
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