CA tax return - Accounting
Problem
Justin Stone (Chapter 14, Problem 88)
Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Karl lives with Ashley, and she fully supports him. Bill spent 2019 traveling in Europe and was not a college student. He had gross income of $4,655 in 2019. Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2019, and many of her expenses were not reimbursed by her health insurance.
Ashley owns Panda Enterprises LLC (98-7654321), a data processing service that she reports as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2019 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses (before the 50\% reduction) of $22,000, and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year.
Ashley has an extensive stock portfolio and has prepared the following analysis:
Note: Ashley received a Form 1099–B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2019, and these are both ordinary dividends and qualified dividends.
Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband (divorce finalized in June 2017). His Social Security number is 123-45-6788.
Ashley itemizes her deductions and provides the following information, which may be relevant to her return:
Item
Amount
Comment
Unreimbursed medical expenses for Ashley
$9,748
Does not include health insurance premiums.
State income taxes paid
1,830
Real property taxes on personal residence
3,230
Interest paid on home mortgage (Form 1098)
8,137
The loan is secured by the residence and was incurred when the home was purchased.
Charitable contributions
1,399
$940 cash payments to Ashley’s church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expenditures.
Sales taxes
619
Amount per sales tax table.
Ashley paid $27,000 in estimated Federal income taxes, did not engage in any virtual currency transactions during the year, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2020 taxes.
Compute Ashley’s net tax payable or refund due for 2019. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 2, 3, A, C, D, and SE and Form 8949. Ashley qualifies for the § 199A deduction for qualified business income. Be sure to include that in your calculations. Suggested software: ProConnect Tax Online.
Due
See Syllabus
Requirement
Prepare the 2019 California income tax return on the appropriate forms (Form 540, etc.). (Even if you use a software program, you must turn in manual entries on forms.) Required Forms: 540 pp. 1-5; CA; Sch. P. (Please do not complete 3801 California Passive Loss Limitations.) FOR ELECTRONIC SUBMISSIONS IN ONLINE CLASSES, PLEASE MAKE EVERY EFFORT TO SUBMIT, IF POSSIBLE, EITHER A SINGLE PDF OR A SINGLE WORD DOCUMENT OF THE ENTIRE TAX RETURN. THANK YOU.
Additional Information
(a) A copy of Stone’s 2019 1040, pp. 1 & 2; Schedules A, B, D, E; Forms 4797 and 8582 (PAL Limitations) calculations will be available in blackboard.
(b) Change the address to Carmel, California.
(c) Assume numerical calculations are the same for California unless otherwise indicated.
(d) California taxes paid are set forth in the problem.
CA tax withheld**
DMV PPT CA estimates*
(e) Stone wants to contribute $5 to the prostate cancer research fund and $5 to the Libertarian party. If he is unable to so contribute, any impermissible contributions should be shifted to the Rare and Endangered Species program.
(f) Do not calculate a late filing or late payment penalty, interest, estimated penalty, or next year’s estimates. Do not amend federal return (work with the information as is.) Both federal and California overpayments, if any, to be returned to taxpayer.
Check Figures
CA TI 142,253 (19) Fed TI 143,853 (19)
Forms
CA forms and instructions are available at the FTB website.
** SDI, if any, was included in the total of state income taxes on the 1040 (and not excessive).
* Estimates are paid by calendar year end and do not include SDI.
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