Heather and Nikolay Laubert are married and file a joint income tax return . Their address is 3847 Jackdaw Paw, Madison, WI 58493. Nikolay's Social Security number is###-##-#### ***** Heather's is###-##-#### ***** is a mechanical engineer, and Heather is a highly renowned speech therapist. She is self-employed. They report all of their income and expenses on the cash method. For 2013, they report the following items of income and expenses:
-Gross receipts from Heather's business $110,000
-Rent on Heather's Office 12,000
-Recievables written off during the year(Recieved in Heather's business) 1,300
-Subscriptions to linquistic journals for Heather 250
-Salary for Heather's secretary-receptionist 22,000
-Nikolay's Salary 78,000
-Qualified medical expenses 12,000
-Property taxes on their personal residence 4,200
- State income tax refund received this year(the tax benefit was received in the prior year from the state income tax deduction) $400
-State income taxes withheld on Nikolay's salary 4,600
-Federal income taxes withheld on Nikolay's Salary 12,000
-Heather's estimated tax payments 20,000
-Interest paid on residence 11,000
-Income tax preparation fee for the prior year's return paid this year ($500 is allocated to preparation of schedule C) 940
Heather and Nikolay sold the following assets, respectively:
Asset: KNA Stock Acquired:2/12/12 Sold: 3/13/13
Sales Price: $14,000 Cost:$8,000
Asset: AEN Stock Acquired:3/2/13 Sold:7/7/13
Sales Price: $20,000 Cost: 22,000
Asset: KLN Stock Acquired:6/8/08 Sold:4/10/13
Sales Price: 13,000 Cost: 17,000
Asset: Motorcycle Acquired:5/3/05 Sold:9/12/13
Sales Price: 2,500 Cost: 6,000
Heather owned the KLN stock and sold it to her brother, Jacob. Heather and Nikolay used the motorcycle for personal recreation. In addition to the items above, they donate Miner Corporation stock to their community church. The FMV of the stock on the date it is donated (8/13/13) is $6,200. It cost $2,700 when purchased on 3/12/95. Heather and Nikolay's home is burglarized during the year. The burglar stole an entertainment system (FMV $12,000; cost $10,000). and a painting (FMV $1,500;cost $1,300). The insurance company pays $1,500 for the entertainment system, $4,000 for the jewelry, and $500 for the painting.
COMPLETE HEATHER AND NIKOLAY'S FORM 1040, SCHEDULES A, C, D, AND SE, FORM 4684, AND FORM 8283. FOR PURPOSES OF THIS PROBLEM DISREGARD THE ALTERNATIVE MINIMUM TAX AND AND ANY CREDITS. PREPARE APPROPRIATE FORMS- INCLUDING THOSE FOR SELF-EMPLOYMENT TAX, BUT NOT AMT. STRIVE FOR THE LOWEST TAX LIABILITY FOR THE TAXPAYERS(TAX AVOIDANCE NOT TAX EVASION). INCLUDE ANY ASSUMPTIONS WHICH YOU FEEL WILL ASSIST IN THE AUDIT (GRADING) PROCESS.