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. Noah owns/operates a pet store whereas Joan is a fire-fighter for the city in Santee.

  1. They have two children, a son named Billie Bob (Social Security number 598-01-2345), who is 7, and a daughter named Mary Sue (Social Security number 554-33-2411), who is 4. The Arcs paid $3,200 to the Roundup Day Care Center to take care of Mary Sue while they were at work. Since Joan is a firefighter, she’s home in the afternoon to care for Billie Bob after school.
  2. For the current year, Joan’s W-2 from the city fire department is located. Noah made estimated federal income tax payments of $12,000 and estimated state income tax payments of $1,020 during the current year.
  1. 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:
  2. Sales revenue $ 144,300
  3. Expenses: Cost of sales $61,900

Insurance 780

Accounting fees 1,800

Wages 25,100

Payroll taxes 2,250

Business meals (total) 400

Utilities 2,650

Rental expense 7,600

6. Noah and Joan paid the following amounts during the year (all by check):

Political Contributions $250

Church donations $2625

Real Estate taxes on their home $1350

Medical fees $700

Tax Return Prep fees $350

Credit card interest fees $220

Automobile insurance premiums $600

Uniforms for Joan $125

7. 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 02/11/06 08/15/16 $4500 $2400

Yellow Co 01/13/16 06/05/16 $6000 $5300

Red Co 10/02/07 10/07/16 $12200 $1600

The expenses of sale are included in the cost basis. Noah has a long-term capital loss carryover from last year of $2,350.

8. During the year, Noah and Joan received the following qualifying dividends:

Exxon: $302

Texas Utilities: $220

All stocks, bonds, and savings accounts were purchased or established with community property.

9. 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:

Insurance $575

Interest Expense $6870

Property Taxes $1000

Miscellaneous Expense $600

Depreciation on the house acquired in 1992 $3000

10. All members of the Arc household were covered for the entire year under health care insurance through Joan’s employer.

11. The Arcs paid California general sales tax of $976 during the year.

  1. Required: 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

Qualified Dividends and Capital Gain Tax Worksheet