Ron and Chelsea Jade have provided the following information for you to prepare their 2013 federal income tax return:  1.   Ron (SS# 123-45-6789) and Chelsea (SS# 987-65-4321) Jade are married and are both age 45.  They reside at 456 Crosslanes Drive, Berkley, Michigan, 48072.  Both Ron and Chelsea want $3 to go to the Presidential Election Campaign.  The Jades have a 24-year old daughter, Emily (SS# 444-38-1298) and a 16-year old son, Terry (SS# 222-13-4567).  Emily is a full-time student at CMU.  She earned $5,500 from a part-time job she held in the summer.  Emily used all $5,500 toward her own support.  She also received a $4,500 scholarship from CMU's School of Music in 2013.  Ron and Chelsea contributed $6,000 toward her support in 2013.  2.   Ron is a salaried taxpayer, employed as a sales account representative for Regal Design Corporation.  Regal Design designs and builds commercial and residential buildings.  Ron’s W-2 provided the following information:                Gross Salary                                         $  87,800                Federal income tax withheld                      9,950                Michigan income tax withheld                  3,600                Social Security tax withheld                      6,717 In addition to his gross salary of $87,800, Ron also received the following fringe benefits from Regal Design Corporation.  Unless stated otherwise, the fringe benefits are provided to all employees. a.   Regal Design has a qualified pension plan.  Under the plan, Regal Design matches any contribution to the plan up to 5% of the employee’s annual salary.  Ron contributed $4,000 into the plan; his contribution was matched by Regal Design.  Ron’s pension plan account earned $800 in ordinary dividends during the year.  b.  Regal Design paid 100% of the premiums for Ron and his dependents to be covered under a Blue Cross/Blue Shield corporate medical insurance policy (cost of premiums - $3,500).  Ron received $3,200 in reimbursements from the plan for his family medical expenses.   c.  Regal Design provides employees with a flexible benefits plan.  Ron had $1,500 withheld from his salary, which was paid into the plan during the year.  The amount of his family’s medical, dental, and optometry costs not reimbursed by insurance totaled $1,800.  The flexible benefits plan reimbursed him for $1,500 of the $1,800 in additional expenses. d.  Regal Design paid 100% of the premiums on a group-term life insurance policy for Ron.  He named Chelsea as beneficiary.  Face value of the policy is $160,000.  The group-term life insurance coverage for Ron cost Regal Design $375. e.   Regal Design paid 100% of the premiums on a corporate disability insurance policy for Ron.  The disability insurance coverage for Ron cost Regal Design $650. f.   During the year, Regal Design provided Ron with free retirement planning services from Fidelity Investments.  The value of the services Ron and Chelsea received from Fidel.

1. Ron and Chelsea Jade have provided the following information
for you to prepare their 2013 federal income tax return:
1. Ron (SS# 123-45-6789) and Chelsea (SS# 987-65-4321)
Jade are married and are both age 45. They reside at 456
Crosslanes Drive, Berkley, Michigan, 48072. Both Ron and
Chelsea want $3 to go to the Presidential Election Campaign.
The Jades have a 24-year old daughter, Emily (SS# 444-38-
1298) and a 16-year old son, Terry (SS# 222-13-4567). Emily
is a full-time student at CMU. She earned $5,500 from a part-
time job she held in the summer. Emily used all $5,500 toward
her own support. She also received a $4,500 scholarship from
CMU's School of Music in 2013. Ron and Chelsea contributed
$6,000 toward her support in 2013.
2. Ron is a salaried taxpayer, employed as a sales account
representative for Regal Design Corporation. Regal Design
designs and builds commercial and residential buildings. Ron’s
W-2 provided the following information:
Gross Salary $ 87,800
Federal income tax withheld 9,950
Michigan income tax withheld 3,600
Social Security tax withheld 6,717
In addition to his
gross
salary of $87,800, Ron
also
received the following fringe benefits from Regal Design
Corporation. Unless stated otherwise, the fringe benefits are
provided to all employees.
a. Regal Design has a qualified pension plan. Under the plan,
Regal Design matches any contribution to the plan up to 5% of
the employee’s annual salary. Ron contributed $4,000 into the

2. plan; his contribution was matched by Regal Design. Ron’s
pension plan account earned $800 in ordinary dividends during
the year.
b. Regal Design paid 100% of the premiums for Ron and his
dependents to be covered under a Blue Cross/Blue Shield
corporate medical insurance policy (cost of premiums -
$3,500). Ron received $3,200 in reimbursements from the plan
for his family medical expenses.
c. Regal Design provides employees with a flexible benefits
plan. Ron had $1,500 withheld from his salary, which was paid
into the plan during the year. The amount of his family’s
medical, dental, and optometry costs not reimbursed by
insurance totaled $1,800. The flexible benefits plan reimbursed
him for $1,500 of the $1,800 in additional expenses.
d. Regal Design paid 100% of the premiums on a group-term
life insurance policy for Ron. He named Chelsea as
beneficiary. Face value of the policy is $160,000. The group-
term life insurance coverage for Ron cost Regal Design $375.
e. Regal Design paid 100% of the premiums on a corporate
disability insurance policy for Ron. The disability insurance
coverage for Ron cost Regal Design $650.
f. During the year, Regal Design provided Ron with free
retirement planning services from Fidelity Investments. The
value of the services Ron and Chelsea received from Fidelity
was $200.
g. Regal Design allows all employees to purchase building
design services from the company at a 35% discount. Ron had
Regal Design design a new home the Jades are planning to
build. The design service was valued at $2,000, so with his
discount, Ron paid Regal Design $1,300.

3. h. Ron took four MBA courses this year. Since he earned an A
in each of the courses, Regal Design's educational assistance
program reimbursed $6,300 of the tuition he paid for the
courses.
i. Ron also received certain other fringe benefits not available
to all employees. He received free parking for the entire year in
the company’s security garage that would normally cost $250
per month. In addition, Regal Design paid $850 of his
professional association dues and professional magazine
subscriptions. Regal Design also paid Ron’s $325 annual dues
to a health club owned and operated by Beaumont Hospital.
The health club is located in the same building as his office.
3. Ron slipped on an icy spot in front of a grocery store during
the current year and broke his hip. He was unable to work for
three weeks and incurred $4,100 in medical costs, all of which
were paid by the owner of the store. The store also gave him
$800 for pain and suffering resulting from the injury. For the
time he was unable to work, Regal Design Corporation’s
disability plan paid him $3,000 in disability income. A
disability policy Ron owned individually paid him an additional
$1,250 in disability income (Ron pays the premiums on this
disability insurance).
4. Ron and Chelsea earned the following in interest and
dividend income per the 1099 forms they received from the
various financial institutions. 100% of all ordinary dividends
are also qualified dividends.
Dividends:
Quantum Corporation (100% ordinary dividend)
$ 750
T Rowe Price Health Sciences Mutual Fund (100%
capital gain distribution) 400

4. Consumers Energy (30% return of capital
dividend) 550
Northwestern Mutual Life (dividend on
Ron’s 450
life insurance policy)
Biogen Corporation - 50 shares of common stock
(Stock had a FMV of
$5/share on the date of distribution; all shareholders
were able to take their
distribution in the form of stock or cash; Ron chose to
receive 50 shares of stock)
Interest:
PNC Bank
$ 60
State of Illinois bonds
475
City of Toronto, Canada bonds
250
U.S. Series EE Savings Bonds (redeemed for
$4,250, 3,750
purchased in 1994 for $2,000; interest income has
never been reported on the bonds; proceeds were
used to purchase furniture)
5. The Jades had no type of ownership interest or authority
over any financial account in any foreign country, including any
type of foreign trust.
6. Chelsea owns 700 shares of Grubstake Mining &
Development common stock. Grubstake is organized as a S
corporation and has 35,000 shares outstanding. Grubstake
reported total current year ordinary business income of

5. $600,000 and total regular interest income of $42,000. In
addition, Grubstake paid dividends of $1 per share during the
current year, so Chelsea received a dividend of $700. All her
investment in Grubstake is “at-risk.” Grubstake is a passive
activity investment for Chelsea.
7. Chelsea's father died last year. In addition to receiving
$300,000 in cash as an inheritance from her father’s estate when
the estate was settled this year, she was also designated
beneficiary of a $200,000 life insurance policy on the life of her
father. Chelsea elected to receive the life insurance proceeds in
annual payments of $21,600 over 10 years. She received the
first annual payment of $21,600 on January 1, 2013.
8. The Jades received a 2012 federal income tax refund of
$1,050 on May 12, 2013. On May 17, 2013, they received their
2012 income tax refund from the State of Michigan of $825.
Their total itemized deductions in 2012 was $17,800.
9. Chelsea’s name was drawn at the 2013 Home and Garden
Show and she won $100 in cash and a new refrigerator. In
announcing the prize at the Show, the announcer said the
refrigerator had a manufacturer’s suggested retail price of
$1,500. However, Ron has a sales flyer from ABC Warehouse
that advertises the same refrigerator for $1,300.
10. Ron is active in the local chapter of the Michigan Audubon
Society. During the year, he received an award for outstanding
service to the organization. He was given a plaque and a $50
gift certificate that was donated to the chapter by local store
merchants.
11. Ron received an award for 2013 Salesperson of the Year
from Regal Design at its annual 4th of July employee picnic.
His award was a new fishing set, which sold for $250 at MC

6. Sports.
12. Ron won $550 at the slots and $300 at bingo on his annual
Michigan casino tour this year, but he lost $1,100 at roulette at
the Soaring Eagle casino. He did win $400 in the office March
Madness Basketball pool this year, although he paid $75 to join
the pool.
13. Ron and Chelsea purchased a 15-year annuity for $225,000
in 2000 when Chelsea quit work to become a stay-at-home
mom. The annuity pays them $1,470 per month. They received
$17,640 in total monthly annuity payments this year.
14. Ron and Chelsea received a Form 1099-B from their broker
for the sale of the following securities during the year:
Security
Sale Date
Purchase Date
Sales Price
Commission Paid on Sale
Tax Basis
State of Illinois Bonds
4/19/13
2/19/09
$14,550
$550

7. $10,400
300 shares of Quantum Corporation stock
10/29/13
2/10/13
$5,880
$280
$3,500
250 shares of West Corporation stock
1/1/13
9/8/11
$2,200
$200
**
**The Jades purchased 600 shares of stock in West Corporation
for $7,560 on September 8, 2011. Shortly after the purchase,

8. they received a nontaxable 40% stock dividend of 240
additional shares.
15. The Jades sold their 2008 Buick LaCrosse for $8,000 on
September 5, 2013 to an unrelated buyer. They purchased the
car on July 8, 2010, for $15,000.
16. Ron and Chelsea’s personal records disclose the following
expenditures during the current year:
Lawn care and snow removal services for
home $ 1,300
Charitable contributions to First United
Church 6,100
Interest on home
mortgage
7,775
Real estate taxes on
home
3,300
Utilities paid on
home
4,200
Purchase of home furniture
4,250
17. The Jades made $1,400 in total 2013 estimated federal
income tax payments and $600 in total 2013 estimated Michigan
income tax payments as follows:
a. The federal estimated income tax payments were paid as
follows: (1) $350 on April 15, 2013; (2) $350 on June 15,
2013; (3) $350 on September 15, 2013: and (4) $350 on January
15, 2014.
b. The Michigan estimated income tax payments were paid as
follows: (1) $150 on April 15, 2013; (2) $150 on June 15,

9. 2013; (3) $150 on September 15, 2013: and (4) $150 on
December 15, 2013.
REOUIRED:
1. Complete Ron and Chelsea’s federal income tax return for
2013. You will need to complete Forms 1040, Schedule A,
Schedule B, Schedule D, Form 8949, and Schedule E. Despite
what any line on a form states, do not complete any form other
than these forms.
2. You can download the required forms from the IRS website,
www.irs.gov
or use any tax software package. If you need to refer to the
instructions to the forms, they are available at the IRS website.
Neatness of the completed forms will be considered in the
grading of the project
.
3.
Use the attached schedule, Table A-1
to determine Ron’s taxable compensation from Regal Design
Corporation. Fill in the column titled “Taxable Amount” with
the amount that you think is included (or reduces) Ron’s gross
income. The “taxable compensation” amount at the bottom of
the table
must agree
with the amount you report on line 7, Form 1040.
Attach your completed Table A-1 to your return to receive any
partial credit for the amount shown on line 7, Form 1040.
4. Attach a separate sheet of paper listing the type and amount
of any items reported in “other income” on line 21, Form 1040.
5. You may complete the project with one other student from
either section. If you do, turn in one completed return with the

10. names of both students listed who completed the project.
6. The project is worth 53 points.
7.
Due Date
: Monday, April 14th, by 8:00 p.m.
Additional Return Preparation Notes
1. The gross salary of $87,800 is before
any
subtractions or additions due to withholding or fringe benefits.
2. All charitable contributions to FirstUnitedChurch were
made in cash in amounts of less than $250 each.
Table A-1
Schedule of Regal Design Corporation Taxable Compensation
Item
Regal Design Corporation
Amount
Taxable
Amount

11. Annual salary
$ 87,800
Federal income tax withholding
$ 9,950
Michigan
income tax withholding
$ 3,600
Social Security tax withholding
$ 6,717

12. Pension plan contribution paid by Ron
$ 4,000
Pension plan contribution paid by Regal Design Corporation
$ 4,000
Medical insurance premiums
$ 3,500
Reimbursement of medical costs
$ 3,200

13. Ron's payment into flexible benefits plan
$ 1,500
Reimbursement from flexible benefits plan
$ 1,500
Group term life insurance premiums
$ 375
Disability insurance premiums
$ 650
Payment of Fidelity retirement planning services

14. $ 200
Discount received on home building design
$ 700
Tuition reimbursed by educational assistance program
$ 6,300
Health club dues
$ 325
Free parking

15. $ 3,000
Professional dues and subscriptions
$ 850
Disability income from Regal Design' s plan and Ron's plan
$ 4,250
Taxable Compensation