Tony and Jeannie Nelson are married and file a joint return. They have four children whose ages are: 5,17,18 & 23. The three youngest live at home with their parents and qualify as their dependents. The oldest Roger got married on 5/5 2021 and lives with his wife, Jane. The 18 year- old Tabitha is studying Fine Arts at Savannah College of Art & Design. During the summer she helps her mother put together the art exhibits. They provide you with the following information regarding their 2021 upcoming tax return: 1) Tony Nelson is an aerospace engineer he runs an engineering firm, Nelson Engineering (NE), as a sole proprietorship since 2010. a) NE has very lucrative contracts with numerous aerospace companies and during 2021 it earned $647,000. b) NE rents an office downtown where they meet with clients and conducts business. The rent includes all utilities. NE paid $36,000 in rent expense for 2021. In December 2021, the landlord offered to maintain the same yearly rent cost and Tony could receive an additional month's rent for free if he prepaid his 2022-year rent in advance. Tony agreed and paid an additional $36,000 on December 1, 2021 to cover January 2022 through January 2023 rent. c) NE obtained a business loan from SunTrust Bank and paid $2,400 in prepaid interest for July 1, 2021 through June 30, 2022. d) NE has a few employees, including an electrical engineer, a part-time engineering intern and an office manager. The combined wages for these employees were $197,000. Payroll taxes including for these employees is $15,000. e) Tony took different business clients to see several home Miami Heat games during January and February of 2021 followed by dinners at nearby restaurants where business was discussed. The meals were not considered lavish. The total cost for the Heat tickets and accompanying meals were $900 and $600, respectively. f) In April 2021, Tony flew to a two-day engineering convention held in Phoenix, AZ requiring a two-night hotel stay. While there, Tony noted that the convention dress code was formal when he thought it would be casual. Tony immediately purchased a business suit for $400 (not considered lavish) at a nearby department store. All food costs were covered by the convention organizers. Other trip costs that Tony paid were airplane ticket $400 and hotel lodgings cost $100/night for two nights. g) The depreciation for the year on the fixed assets owned by NE are estimated to total $3,500. h) All of NEs business transactions are properly documented and supported by receipts/invoices. In addition to deductible portion of the items listed above the business will have an additional $4,700 of deductible other expenses. 2) Jeannie Nelson is an artist; she works part-time teaching art 2 days a week at a magnet art school in their town. She earned $10,000 in salary from Cocoa Beach, School of the Arts, the following items were withheld from her gross wages, $1,000 federal income taxes, $100 state income tax, $620 social secu.

1. Tony and Jeannie Nelson are married and file a joint return. They have four children whose ages
are: 5,17,18 & 23. The three youngest live at home with their parents and qualify as their
dependents. The oldest Roger got married on 5/5 2021 and lives with his wife, Jane. The 18 year-
old Tabitha is studying Fine Arts at Savannah College of Art & Design. During the summer she
helps her mother put together the art exhibits. They provide you with the following information
regarding their 2021 upcoming tax return: 1) Tony Nelson is an aerospace engineer he runs an
engineering firm, Nelson Engineering (NE), as a sole proprietorship since 2010. a) NE has very
lucrative contracts with numerous aerospace companies and during 2021 it earned $647,000. b)
NE rents an office downtown where they meet with clients and conducts business. The rent
includes all utilities. NE paid $36,000 in rent expense for 2021. In December 2021, the landlord
offered to maintain the same yearly rent cost and Tony could receive an additional month's rent
for free if he prepaid his 2022-year rent in advance. Tony agreed and paid an additional $36,000
on December 1, 2021 to cover January 2022 through January 2023 rent. c) NE obtained a
business loan from SunTrust Bank and paid $2,400 in prepaid interest for July 1, 2021 through
June 30, 2022. d) NE has a few employees, including an electrical engineer, a part-time
engineering intern and an office manager. The combined wages for these employees were
$197,000. Payroll taxes including for these employees is $15,000. e) Tony took different
business clients to see several home Miami Heat games during January and February of 2021
followed by dinners at nearby restaurants where business was discussed. The meals were not
considered lavish. The total cost for the Heat tickets and accompanying meals were $900 and
$600, respectively. f) In April 2021, Tony flew to a two-day engineering convention held in
Phoenix, AZ requiring a two-night hotel stay. While there, Tony noted that the convention dress
code was formal when he thought it would be casual. Tony immediately purchased a business
suit for $400 (not considered lavish) at a nearby department store. All food costs were covered
by the convention organizers. Other trip costs that Tony paid were airplane ticket $400 and hotel
lodgings cost $100/night for two nights. g) The depreciation for the year on the fixed assets
owned by NE are estimated to total $3,500. h) All of NEs business transactions are properly
documented and supported by receipts/invoices. In addition to deductible portion of the items
listed above the business will have an additional $4,700 of deductible other expenses. 2) Jeannie
Nelson is an artist; she works part-time teaching art 2 days a week at a magnet art school in their
town. She earned $10,000 in salary from Cocoa Beach, School of the Arts, the following items
were withheld from her gross wages, $1,000 federal income taxes, $100 state income tax, $620
social security and $145 Medicare. She is not covered under their insurance plan as she only
works 15 hours a week. She also volunteers 5 hours a week with the Girl Scouts of America as
an art instructor. 3) Jeannie is known for beautiful Arabian influenced abstracts. During May and

2. August of this past year she had a virtual exhibition and sold paintings at each event. She
estimates that the cost of each painting in canvas and supplies is about $425. a) The sales are as
follows: i) May - 18 paintings for a total of $ 16,200 ii) August 14 paintings for a total of $
15,000 b) She paints in a studio located in a separate building on the property of their home. The
expenses related to the studio allocated on the basis of square footage are as follows: i)
Depreciation $3,500 ii) Taxes $1,900 iii) Utilities $2,400 4) The Nelsons had the following
assets/investments activities occur during this year: a) 4/5/2021 sold for $23,000 common stock
in York Co. that was purchased for $17,000, on 2/14/2010, The shares of York Co are qualified
small business stock under 1202. b) 7/1/2021 sold 200 shares of common stock in New Co. for
$17,000. They had purchased 100 shares on 8/7/2016 for $7,500 and 100 shares on 8/7/2017 for
$ 8,250. c) 9/15/2021 sold 150 shares of common stock of City Co for $14,000 total that were
purchased for $9,500 on 3/18/2021. d) 8/5/2021 sold for $28,000 antique coins that Jeannie
inherited from her great-aunt on January 16, 2021 when its FMV was $26,500. Her great aunt
had a basis in the coin of $2,000. e) 10/1/2021, they sold a portion of a parcel of land with a
small building for $65,000 that had a basis of $23,000 and was purchased in 2002. $25,000 of
the gain is unrecaptured 1250 property. f) 10/15/2021 sold stock in Space Explorers Inc. for
$31,500 that they had purchased on 8/14/2015 for $18,000. g) The Nelsons have a Long-term
loss carryover of $14,000 from 2020. h) Interest income earned from their various accounts is a
total of $1,200. None of these amounts are related to municipal bonds. 5) On April 13 of 2021,
the couple paid their $1,500 in state taxes due with their 2020 state tax return. They paid state
income tax for 2021 of $3,200. The couples estimated state and local sales taxes for 2021 will be
a total of $2,800. The property taxes paid on their principal residence for 2021 is $7,600,
excluding any amounts allotted to the artist studio. 6) On October 1st they donated a parcel with
a separate small building to the Girl Scouts of America for use as an art studio. They had
purchased the acres in 2002 and recently divided a portion for sale (see 4e above). This portion
has a basis of $61,500. A professional appraiser determined the fair market value of the property
was $95,000 on September 24th of 2021. 7) This year the Nelsons had several medical expenses
not reimbursed by insurance these are as follows: a) Tony & Jeannie both received corrective eye
surgery, at a total cost of $ 6,000 b) $ 2,800 for braces for the 12-year-old c) $ 1,600 in co-
payments for covered medical procedures. d) $ 700 in payments for over-the-counter
medications. e) $2,500 at the urgent care clinic for Jeannies brother Sam who hurt his back
helping her set up the art exhibits in May. He is not their dependent. f) They pay $8,800 in health
insurance premiums to cover the family. 8) The Nelsons spent $ 16,200 in home mortgage
interest on their original acquisition cost of $800,000 from 2014. They do not have any
additional mortgage debt. 9) The Nelsons paid quarterly estimated tax payments of $21,000 per
quarter, based on their 2020 liability which was a total of $84,000. Based on their 2020 income

3. of $280,000 the Nelsons did not receive any of the stimulus checks.A A B B D D E F G H 3
2021 4 Explanation/Computations as needed 5 6 Qualified business income (QBI) from Nelson
EngineeringB C D E F G G H 1 Child Tax Credit N 2 Base Credit Addl 2021
Explanation/Computations as needed 3 # of children eligiblA B 1 2 D E H Tony & Jeannie
Nelson Nelson Engineering 2021 Amount Explanation/Computations as needed 3 4 Item
Description 5A B F G H 1 1 3 Explanation/Computations as needed A C D E Tony & Jeannie
Nelson 2 Jeannie Abstracts 3 2021 4 Item DescripA B G H 1 J M N O 1 2 3 D F Tony &
Jeannie Nelson Sale of Assets 2021 Short Term Net Gain Capital Cost (Loss) Gain/(Loss) 4A B
C D E F G H Tony & Jeannie Nelson Itemized Deductions 2021 Hem Description Amount
Subrora/ Total splanation/Compulations Show transcribed data Expert Answer This solution was
written by a subject matter expert. It's designed to help students like you learn core concepts.
Anonymous answered this 2,290 answers Answer:- . To calculate income tax payable for 2021:
Filing jointly Tony's business income $647,000 Jeannie's net employment income 8,135 Income
from sale of paintings 31,200 (Note: $ 16,200+ $ 15,000= $ 31,200) Short-term capital (sale of
stocks) 4,500 (Note: $14,000-$9,500= $4,500) Short-term capital gain (sale of antique coins)
1,500 (Note: $28,000- $26,500 FMV= $1,500) Interest income 1,200 =Adjusted Gross income
$693,535 Less itemized deductions: Rent expense 36,000 Business expense 182,000 (Note:
Wages of employees 197,000- $15,000 Payroll taxes= $182,000) Travel expense (airfare ticket)
400 Meals for clients 300 (Note: $600 x 50%) Hotel lodgings cost 200 (Note: $100/night for two
nights) Depreciation expense on fixed assets 3,500 Other Tony's deductible expenses 4,700
Expense for painting 13,600 (Note: $425 x 32 paintings= $13,600) Studio expenses 7,800 (Note:
$3,500 + $3,500 + $2,400) State, local taxes and property tax 10,000 Charitable donation 95,000
(Note: AGI $ x 50%) Home mortgage interest 16,200 =Total itemized deductions ($369,700)
=Taxable income $323,835 $323,835- $172,750 x 24%= $36,260.4 $36,260.4 + $29,502=
$65,762.4 =Income tax payable before credit $65,762.4 Child tax credit (2,000) (Note: The child
must be younger than 17 at the end of the tax year to be eligible) Credit for dependent (1,000)
(Note: Their children aged 17 and 18 qualify as dependents) = $62,762.4 Add: Failure-to-pay
penalty (liability 2020) 9,804 Total long-term capital gain tax 14,272.5 =Income tax payable for
2021 $86,838.9 (rounded off $86,839) . Explanation:- . Given facts: Tony and Jeannie Nelson
are married and file a joint return. They have four children whose ages are: 5,17,18 & 23. The
three youngest live at home with their parents and qualify as their dependents. The oldest Roger
got married on 5/5 2021 and lives with his wife, Jane. The 18-year-old Tabitha is studying Fine
Arts at Savannah College of Art & Design. They provide you with the fo