Noah and Joan Arc’s Tax Return
Noah and Joan Arc live with their family at 4342 Josie Jo, Santee, CA 92071. Noah’s Social
Security number is 434-11-3311; Joan’s is 456-87-5432. Both are in their mid-30s and
enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a ï¬re-
ï¬ghter for the city.
1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-
2345), who is 7 years old, and a daughter named Mary Sue (Social Security number
554-33-2411), who is 4 years old. The Arcs paid $2,800 to the Roundup Day Care
Center to take care of Mary Sue while they worked. Because Joan is a ï¬reï¬ghter, she
was home in the afternoon to care for Billie Bob after school.
2. For the current year, Joan’s W-2 from the city ï¬re department is located on page D-4.
Noah made estimated federal income tax payments of $12,000 and estimated state
income tax payments of $1,000 during the current year.
3. Noah’s pet store is located at 18542 Mission Road, Santee, CA 92071. The name of
the store is ‘‘The Arc,’’ and its taxpayer ID number is 95-9876556. The beginning
inventories and ending inventories are both $10,000. The revenue and expenses for the
year are as follows:
Sales Revenue (merchant card sales) $ 144,000
Expenses:
Cost of Sales $62,000
Insurance 750
Accounting fees 1,800
Wages 25,000
Payroll taxes 2,250
Utilities 2,700
Rental expense 7,200
Total Expenses (101,700)
Net Income $ 42,300
4. 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)2,300
Real estate taxes on their home 1,200
Mortgage interest for purchase of home See Form 1098 (page D-5)
Tax return preparation fees 350
Credit card interest 220
Automobile insurance premiums 600
Uniforms for Joan 125
5. Noah likes to invest in the stock market. His Form 1099-B showed the following
information for Noah’s stock sales:
Stock Date Acquired Date Sold Sales Price Cost Basis
Blue Co. 02/11/03 08/15/12 $ 4,500 $2,300
Yellow Co. 01/31/12 06/05/12 6,000 5,000
Red Co. 10/02/04 10/07/12 12,000 1,600
The expenses of sale are included in the cost basis. Noah has a long-term capital
loss carryover from last year of $2,300.
6. During the year, Noah and Joan received the following qualifying dividends:
Exxon $320
Texas Utilities 220
Coca-Cola See 1099-DIV (page D-4)
All stocks, bonds, and savings accounts were purchased or established with com-
munity property.
7. Noah and Joan own rental property located at 6431 Gary Ct., San Diego, CA 92115.
The revenue and expenses for the year are as follows:
Rent Income See 1099-MISC (page D-5)
Insurance $ 550
Interest expense 7,000
Property taxes 1,000
Miscellaneous expenses 600
Depreciation (the house was acquired in 1990) 3,000
Required: Although Noah and Joan do not believe their tax return will be unduly
complicated, they do realize their limitations and come to you for assistance. You are
to prepare their federal income tax return in good form, signing the return as the
preparer. Do not complete a California state income tax return. Noah and Joan have
completed a tax organizer and have also given you several IRS forms (see pages D-4
and D-5) that they were not sure what to do with. Assume any other information
(addresses, etc.) that you may need. The following forms and schedules are required:
Form 1040 Schedule E
Schedule A Schedule SE
Schedule B Form 2441
Schedule C Form 8949
Schedule D
Note: The forms included in Appendix D are provided for the student to work only
one of the two comprehensive problems. If desired, additional forms may be obtained
from the IRS Web site at www.irs.gov. use 2012 form.
Hi there! Click one of our representatives below and we will get back to you as soon as possible.