BUS 377 Individual Taxation
Calculate the Jamisons’ tax refund or amount due for tax year 2019. You do not need to complete the actual tax return. If required information is missing, use reasonable assumptions to fill in the gaps.
Jim (age 36) and Judy (age 39) Jamison are married and live in North Pole, Maine. The Jamisons’ have two children: Jane, age 15, and Jill, age 12. The Jamisons’ would like to file a joint tax return for the year.
The following information relates to the Jamisons’ tax year (ignore):
Judy Jamison’s Form W-2 provided the following wages and withholding for the year:
|Employer||Gross Wages||Federal Income Tax Withholding||State Income Tax Withholding|
All applicable and appropriate payroll taxes were withheld by the respective employer. All the Jamison family was covered by minimum essential health insurance during each month in 2019. The insurance was provided by Jim’s company SANTA’S TOY SHOP. Judy’s employer did not offer health insurance since most employees were healthy, little elves. They did, however, get an endless supply of free candy canes to eat while at work.
Jim is a civil engineer who started a toy factory called SANTA’S TOY SHOP. SANTA’S TOY SHOP is conducted as a sole proprietorship with Jim being the sole owner. SANTA’S TOY SHOP started business on January 1, 2019 and is located at 1515 West Industrial Road North Pole, Maine 12345 (EIN 20-1616167).
Jim reported the following information for SANTA’S TOY SHOP’s business activities (SANTA’S TOY SHOP uses the cash method of accounting and is a sole proprietorship). Ignore self-employment taxes.
Cash receipts $602,500
Depreciation (tax purposes) 52,500
Office building rent 50,000
Equipment leases 16,050
Taxes and licenses 5,875
Employee health insurance 35,000
Office supplies 4,500
Legal and professional fees 6,500
Repairs and maintenance 4,750
Fine for illegal dumping of toxic sludge 23,500
*Gifts to customers 30,000
*The gifts to customers consisted of Rolex’s Jim gave to his top 4 buyers of his toys. The cost of each Rolex was $7,500.
Jim drove his personal vehicle for business during some parts of the year. He drove his car a total of 23,500 miles. This included 2,250 miles for business. The remaining 21,250 was personal miles. He has written documentation to support his business miles. He also knew there would be a penalty if he owed more than a specific amount if he hadn’t paid in the appropriate estimated income tax payments toward his tax liability. Jim made estimated quarterly tax payments on April 1, June 1, September 1, and December 31 of $3,250 per quarter (paid 4 payments of $3,250).
The Jamisons’ also received the following during the year:
Interest income from U.S. Treasury Bond $675
Interest income from First Maine National Bank $830
Interest income from City of North Pole, ME Bond $750
Interest income from Maine State School Board Bond $950
Workers’ compensation payments to Judy $12,750
Disability payments received by Judy due to injury $12,650
Judy also received the following payments due to a lawsuit she filed for damages sustained in a car accident:
Ten years ago, Jim purchased an annuity contract for $150,000. He received his first annuity payment on January 1, 2019. The annuity will pay Jim $15,000 per year for fifteen years (beginning with this year). The $15,000 payment was reported to Jim on Form 1099-R for the current year (box 7 contained an entry of “7” on the form).
The Jamisons paid or incurred the following expenses during the year:
Dentist/Orthodontist (unreimbursed by insurance) $ 20,500
Doctor fees (unreimbursed by insurance) $ 3,500
Prescriptions (unreimbursed by insurance) $ 1,450
ME state income taxes withheld during 2019 $ 6,250
Real property taxes on residence $ 4,500
Mortgage interest on principal residence $ 14,500
Interest paid on borrowed money to purchase the City of
North Pole, ME municipal bonds $ 900
Interest paid on borrowed money to purchase
U.S. Treasury bonds $ 650
Contribution to the United Way of Aroostook $ 2,000
Contribution to Senator Bob Newhart’s Re-election Campaign $ 5,500
Contribution to the neighborhood Christmas block part $ 750
Contribution to First Baptist Church of Maine $ 8,500
Fee paid to James & Company, CPAs for tax preparation $ 1,400
In addition, Judy drove 8,230 miles commuting to work. The Judy represented to you that she maintained careful logs to support her mileage.
The Jamisons drove 1,250 miles in total to receive medical treatment throughout the year.