Noah and Joan Arc live with their family in Dayton, OH. Noah’s Social Security number is 434-11-3311. Noah was born on February 22, 1984, and Joan was born on July 1, 1985. Both enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a firefighter for the city of Dayton.
1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-2345), born on March 21, 2012, and a daughter named Mary Sue (Social Security number 554-33-2411), born on December 3, 2015. They received a statement from Roundup Day Care Center (located on a separate tab) regarding the cost of child care provided for Mary Sue.
2. Joan and Noah brought a folder of tax documents (see Forms W-2 and 1098). In addition, they received a Substitute 1099 Statement from Charlotte Squab Financial Services (located on a separate tab) regarding their stock transactions for the year.
3. Noah’s pet store is located at 1415 S. Patterson Blvd, Dayton, OH 45409. The name of the store is ‘‘The Arc,” and its taxpayer identification number is 95-9876556. Since you handle Noah’s bookkeeping, you have printed the income statement from your Quickbooks software, shown in the table below:
The Arc
95-9876556
Income Statement
For the Year Ended December 31, 2019
Revenue:
Gross Sales $143,245.00
Less: Sales Returns and Allowances 0.00
Net Sales $143,245.00
Cost of Goods Sold:
Beginning Inventory $10,204.00
Add: Purchases 62,111.00
$72,315.00
Less: Ending Inventory 9,987.00
Cost of Goods Sold 62,328.00
Gross Profit (Loss) $80,917.00
Expenses:
Dues and Subscriptions $0.00
Estimated Federal Tax Payments 8,000.00
Estimated State Tax Payments 4,000.00
Insurance 780.00
Meals and Entertainment 1,338.00
Miscellaneous 0.00
Payroll Taxes 3,840.00
Professional Fees 1,700.00
Rent 8,400.00
Travel 1,231.00
Utilities 1,254.00
Vehicle Expenses 0.00
Wages 25,113.00
Total Expenses 55,656.00
Net Operating Income $25,261.00
4. Detail of The Arc’s meals and entertainment:
$400 Meals associated with business travel
60 Overtime meals for employees
878 Sports tickets for entertaining large customers
$1,338
5. Travel costs are business related and do not include meals.
6. Noah and Joan paid the following amounts during the year (all by check):
Political contributions $250
Church donations (for which a written
acknowledgment was received) 5,025
Real estate taxes on their home 2,375
Medical co-pays for doctor visits 700
Mortgage interest for purchase of home
Tax return preparation fees 350
Credit card interest 220
Automobile insurance premiums 600
Uniforms for Joan 125
Contribution to Noah’s individual retirement account (made on April 1, 2020)6,000
7. Noah has a long-term capital loss carryover from last year of $2,400.
8. Noah and Joan own a condo and use it as a rental property. The condo is located at 16 Oakwood Ave, Unit A, Dayton, OH 45409. Noah provides the management services for the rental including selection of tenants, maintenance, repairs, rent collection, and other services as needed. On average, Noah spends about 2 hours per week on the rental activity. It was rented for 365 days. The revenue and expenses for the year are as follows:
Rental income $13,800
Insurance 575
Interest expense 6,870
Property taxes 1,016
Miscellaneous expenses 700
The home was acquired for $85,000 in 2003. No improvements have been made to the property.
9. The Arcs paid Ohio general sales tax of $976 during the year.
Required:
You are to prepare the Arc’s federal income tax return in good form. You are not to complete an Ohio state income tax return.
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