· You have been engaged to prepare the 2015 federal income tax return for Bob and Melissa Grant. · Your tax form submission should include: Form 1040, Schedules A, B, D, E, and Forms 4684 and 8949 as applicable. You will come across many items on the tax return we have not talked about in class; if we have not covered it in class, and it is not included in the information below, you do not need to address it on this assignment. · Your solution should contain a detailed workpaper that calculates the tax due or refunded with the return and calculated in the form of the tax formula (see Ch. 4 lecture slides). The calculation should be well labeled and EASY to follow. This presentation will be factored into your grade. Do NOT include any references or citations on your workpaper. · You may complete the return by hand ( neatly ) or typed using 2015 forms found on Blackboard or the IRS website. You may complete the form using software, one version of which is available in the ACELAB. o Note – ACELAB software is for the 2014 tax year; if you choose to use this method, you do not need to override the automatically calculated 2014 information, but your workpaper must detail each line item that will differ between the 2014 form generated and the 2015 forms). · Use the following assumptions in preparing the return: o The general method of accounting used by the Grants is the cash method. o Use all opportunities under law to minimize the 2015 federal income tax. o Use whole dollars when preparing the tax return. o Do not prepare a state income tax return. o Ignore the Line 45 calculation for alternative minimum tax. o If required information is missing, use reasonable assumptions to fill in the gaps. Client memo (5 points) · Complete a letter to the client regarding tax planning advice. Identify and explain two reasonable tax planning items the family could use to minimize their tax liability and/or maximize their wealth. All items would be implemented in future years and do not impact the current tax return. BOB AND MELISSA GRANT INDIVIDUAL FEDERAL INCOME TAX RETURN Bob (age 43, SSN #987-45-1234) and Melissa Grant (age 43, SSN #494-37-4893) are married and live in Lexington, Kentucky.  The Grants would like to file a joint tax return for the year. The Grants’ mailing address is 95 Hickory Road, Lexington, Kentucky 40502. The Grants have two children Jared (SSN #412-32-5690), age 18, and Alese (SSN #412-32-6940), age 12.   Jared is still in high school and works part time as a waiter and earns about $2,000 a year. The Grant’s also provide financial support to Bob’s aged (85 years) grandfather, Michael Sr., who is widowed and lives alone. Michael Sr.’s Social Security number is 982-21-5543. He has no income and the Grant’s provide 100 percent of his support. Bob Grant’s Forms W-2 provided the following wages and withholding for the year: Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding National Sto.

1. ·
You have been engaged to prepare the 2015 federal income tax
return for Bob and Melissa Grant.
·
Your tax form submission should include: Form 1040,
Schedules A, B, D, E, and Forms 4684 and 8949 as applicable.
You will come across many items on the tax return we have not
talked about in class; if we have not covered it in class, and it is
not included in the information below, you do
not
need to address it on this assignment.
·
Your solution should contain a detailed workpaper that
calculates the tax due or refunded with the return and calculated
in the form of the tax formula (see Ch. 4 lecture slides). The
calculation should be well labeled and EASY to follow. This
presentation will be factored into your grade. Do NOT include
any references or citations on your workpaper.
·
You may complete the return by hand (
neatly
) or typed using 2015 forms found on Blackboard or the IRS
website. You may complete the form using software, one
version of which is available in the ACELAB.
o
Note – ACELAB software is for the 2014 tax year; if you
choose to use this method, you do not need to override the
automatically calculated 2014 information, but your workpaper
must detail each line item that will differ between the 2014

2. form generated and the 2015 forms).
·
Use the following assumptions in preparing the return:
o
The general method of accounting used by the Grants is the cash
method.
o
Use all opportunities under law to minimize the 2015 federal
income tax.
o
Use whole dollars when preparing the tax return.
o
Do not prepare a state income tax return.
o
Ignore the Line 45 calculation for alternative minimum tax.
o
If required information is missing, use reasonable assumptions
to fill in the gaps.
Client memo (5 points)
·
Complete a letter to the client regarding tax planning advice.
Identify and explain two reasonable tax planning items the
family could use to minimize their tax liability and/or maximize
their wealth. All items would be implemented in future years
and do not impact the current tax return.

3. BOB AND MELISSA GRANT
INDIVIDUAL FEDERAL INCOME TAX RETURN
Bob (age 43, SSN #987-45-1234) and Melissa Grant (age 43,
SSN #494-37-4893) are married and live in Lexington,
Kentucky. The Grants would like to file a joint tax return for
the year. The Grants’ mailing address is 95 Hickory Road,
Lexington, Kentucky 40502.
The Grants have two children Jared (SSN #412-32-5690), age
18, and Alese (SSN #412-32-6940), age 12. Jared is still in
high school and works part time as a waiter and earns about
$2,000 a year. The Grant’s also provide financial support to
Bob’s aged (85 years) grandfather, Michael Sr., who is widowed
and lives alone. Michael Sr.’s Social Security number is 982-
21-5543. He has no income and the Grant’s provide 100 percent
of his support.
Bob Grant’s Forms W-2 provided the following wages and
withholding for the year:
Employer
Gross Wages
Federal Income Tax Withholding
State Income Tax Withholding
National Storage
$66,200
$8,000
$3,750
Lexington Little League
$2,710
0
0

4. Melissa Grant’s Form W-2 provided the following wages and
withholding for the year:
Employer
Gross Wages
Federal Income Tax Withholding
State Income Tax Withholding
Jensen Photography
$24,500
$2,450
$1,225
All applicable and appropriate payroll taxes were withheld by
the Grants’ respective employers. All of the Grant family was
covered by minimum essential health insurance during each
month in 2015. The insurance was provided by Bob’s primary
employer, National Storage.
The Grants also received the following during the year:
Interest income from First Kentucky
Bank $ 130
Interest income from City of Lexington, KY
Bond $ 450
Interest income from U.S. Treasury
Bond $ 675
Interest income from Nevada State School Board
Bond $ 150
Dividend income from General
Mills $
400
Dividend income from Sysco
Corporation $
250
Dividend income from Tyco

5. Security
$ 350
Dividend income from J.M. Smucker,
Inc. $ 525
Workers’ compensation payments to
Bob $ 4,350
Life insurance proceeds on the death of Bob’s
mother $45,000
Cash gift from Melissa’s
father
$ 8,500
Disability payments received by Bob on account of
injury $ 3,500
Melissa received the following payments as a result of a lawsuit
she filed for damages sustained in a car accident:
·
Medical Expenses for physical injuries
$2,500
·
Emotional Distress (from having been physically injured)
$12,000
·
Punitive Damages
$10,000
Total
$24,500
The Grants also received a 1099-B relating to their investment
in 2,000 shares of GE stock, which they purchased on October 7
th
, 2008 for $45,000 and sold on January 3, 2015 for $50,000.

6. Eight years ago, Melissa purchased an annuity contract for
$88,000. She received her first annuity payment on January 1,
2015. The annuity will pay Melissa $15,000 per year for ten
years (beginning with this year). The $15,000 payment was
reported to Melissa on Form 1099-R for the current year (box 7
contained an entry of “7” on the form).
The Grants own a condominium located at 990 El Mar, Unit A,
Lexington, Kentucky 40502. They first rented out the
condominium on October 1, 2015. The revenue and expenses
from the rental unit from October through December are as
follows:
Rental
revenue $3,600
HOA fee expense
300
Property taxes paid
225
Utilities expense
350
On January 3, 2015, the Grants sold their prior principal
residence. They purchased that residence in 2009 and had lived
there full-time until they sold it this year. They originally
purchased the home for $310,000. The Grant family has never
claimed any tax depreciation (nor were they allowed to) on the
home. The sales price of the home was $405,000. The home is
located at 45 East Entrada Trail, Lexington Kentucky 40502.
Melissa works out at a gym located at the photography studio.
The gym is owned and operated by the studio and is available to
all employees. The gym is offered at no cost to employees but is
worth $500 for the year.

7. Melissa entered a contest sponsored by a radio station and won
10 tickets to the touring Broadway-style production of
Wholesome. The value of the tickets was $200 each. Melissa
took her friends from work to the production.
The Grants took two trips to Atlantic City. While on the first
trip they lost $800 gambling, but on the second trip they won
$1,200.
The Grants did not own, control or manage any foreign bank
accounts nor were they a grantor or beneficiary of a foreign
trust during the tax year.
The Grants paid or incurred the following expenses during the
year:
Dentist/Orthodontist (unreimbursed by
insurance) $10,500
Doctor fees (unreimbursed by
insurance) $
625
Prescriptions (unreimbursed by
insurance) $ 380
KY state tax payment made on 4/15/15 for 2014 tax return
liability $ 1,350
Real property taxes on
residence
$ 1,800
Vehicle registration fee based upon age of vehicle
$ 250
Mortgage interest on principal
residence $ 8,560
Interest paid on borrowed money to purchase the City of
Lexington, KY municipal
bonds $ 400
Interest paid on borrowed money to purchase

8. U.S. Treasury bonds
$ 240
Contribution to the Red
Cross
$ 1,000
Contribution to Senator Rick Hartley’s Re-election Campaign
$ 2,500
Contribution to First Baptist Church of Kentucky
$ 6,000
Fee paid to Jones & Company, CPAs for tax
preparation $ 200
During the year, Bob paid $21,600 in alimony and child support
payments to a former spouse, Natalie (SSN #568-72-8787).
When his daughter Wendy (SSN #568-72-666), who lives with
her mother full-time, reaches the age of 18 the payments will
drop to $11,600.
In addition, Bob drove 6,750 miles commuting to work and
Melissa drove 8,230 miles commuting to work. The Grants also
drove 465 miles in total to receive medical treatment at a
hospital in April.
The Grants have represented to you that they maintained careful
logs to support their respective mileage.
The Grants’ personal residence was burglarized on October 1.
The theft occurred during the day while both the Grants were at
work and their children were at school. The Grants had the
following personal-use property stolen:
Item
Purchase Date
Fair Value on Date of Theft
Tax Basis of Item
Insurance Reimbursement Received
Laptop computer and Printer

9. 09/01/2014
3,000
3,000
500
Rifle
03/01/2012
2,000
2,500
500
TV/Projector
03/01/2012
5,000
13,000
1,000
2007 Honda Pilot
07/01/2013
4,000
6,500
500
Total
14,000
25,000
2,500
The Grants want to contribute to the Presidential Election
Campaign.
The Grants would like to receive a refund (if any) of any tax
they may have overpaid for the year.
Their preferred method of receiving the refund is by check.