For the Part II (Week 5) assignment, you are asked to do the following:
Use the Part I assignment you completed previously.
Correct your Part I assignment mistakes, if any, based on the solution you were provided by your instructor at the end of Week 4.
Complete the following additional paragraph items: 2, 3, 13, and 14. .
Save your file as Your Last Name - formname (e.g., Smith-f2106.pdf), and submit it to your instructor via the Week 5 Assignments Dropbox.
2. On January 2, 2011, Karl paid $31,000 (including sales tax) to purchase a gently used Dodge Durango SUV that he uses 92% of the time for business. No trade-in was involved, and he did not claim any § 179 expensing. Karl uses the actual operating cost method to compute his tax deduction, using the 200% declining-balance MACRS depreciation method with a half-year convention. His expenses relating to the Durango for 2011 are as follows:
Interest on car loan
Auto club dues
Oil changes and lubrication
License and registration
In connection with his business use of the Durango, Karl paid $510 for parking and $350 in fines for traffic violations. In 2011, Karl drove the Durango 14,352 miles for business [8,612 miles between January 1 and June 30 and 5,740 miles between July 1 and December 31] and 1,248 miles for personal use (which includes his daily round-trip commute to work).
3. Karl handles most claim applications locally, but on occasion, he must travel out of town. Expenses in connection with these business trips during 2011 were $930 for lodging and $1,140 for meals. He also paid $610 for business dinners with several visiting executives of insurance companies with whom he does business. Karl’s other business-related expenses for 2011 are listed below.
Contribution to H.R. 10 (Keogh) retirement plan
Premiums on medical insurance covering family (spouse and children)
Premiums on disability insurance policy
(pays for loss of income in the event Karl is disabled and cannot work)
State and local occupation fee
Birthday gift for receptionist
($25 box of Godiva chocolates plus $3 for gift wrap)
13. In addition to those previously noted, the Wheats’ receipts during 2011 are summarized below.
Payments to Karl for services rendered (as reported on Forms 1099 issued by several payor insurance companies) pursuant to contractual arrangement
Income tax refunds for tax year 2010
State of Missouri general-purpose bonds
GE corporate bonds
Certificate of deposit at Columbia National Bank
Qualified dividends (Duke Energy)
Proceeds from garage sale (see item 14)
Cash gifts from Karl’s parents
Karl’s net state lottery gains (winnings, $1,000; losses, $900)
14. On June 2 and 3, 2011, the Wheats held a garage sale to dispose of unwanted furniture, appliances, books, bicycles, clothes, and a boat (including trailer). The estimated basis of the items sold is $25,500. All were personal use property.
***TurboTax: If you purchased TurboTax and completed your assignment as a TurboTax file, you will need to submit your assignment as a PDF file before submitting it to your instructor.***