Tax Project

Day 30:

The neighbors are back from vacation and they are still really sunburned. They come by to tell you all the highlights of the trip. The only bad thing that happened was that they were pickpocketed. The swiper got away with $300 cash. Hints No tax impact

Day 31:

Rudy stops by the firepit to boast about how strategic he is about life. He owns a small business called “From Abroad.” When he travels on vacation with his family, he brings back 3 souvenirs and lists them for sale on eBay. He says this allows him to deduct all the expenses of the vacation because this vacation expense was needed to attain the items to sell. He purchased 3 blankets for $30 each. He has already sold these on eBay for $50 each. The total cost of the vacation was $8,000. What questions would you ask Rudy to see if his vacation strategy is right?

Day 32:

Rudy comes by again. Before you can say that you have some concerns about his “From Abroad” business, he tells you about another side business that he is just starting. This business, Rudy’s insurance Co., is a small insurance sales company. He intends to hire 2 employees by the end of the year. He spent $6,000 in qualifying start up costs that included computers, office furniture and supplies. Throughout the rest of the year, the costs are minimal. This business makes sense since Rudy is currently employed by an insurance company as a salesperson.

Day 33:

You run into Charlie out front. He seems to be with some shady friends. After they leave, you confront Charlie. He seems almost proud that he is selling drugs to some of the teens in the neighborhood. He says that he has earned over $10,000 and his cost of good sold was only $1,000. He admits that he has other expenses though of $3,000 for driving (not dedu, security and packaging materials. (Hint: Have to include the income to selling illegal drugs )

Day 34:

Although the neighbor’s house seemed quiet while they were gone, you find out they rented out for 10 of the 14 days for $1,000. This is the only time this year that they rented it out.

Day 35

Rudy takes a client to dinner related to his new start up, Rudy’s Insurance Co. You see him come home and you stop to say hi. What do you recommend to him with respect to the dinner in case he wants to claim it as a business expense? In addition to dinner, Rudy gave his client a $50 gift card to a local wine shop.

Day 36

All is quiet today

Day 37

While you are relaxing at your firepit, Sarah and Rudy come by explain to you that they probably aren’t going to put in a pool. They want to invest some money for retirement instead. They aren’t sure how to do this or what the difference between a conventional IRA or a Roth IRA. What do you tell them?

Day 38

Rudy and Sarah thank you for explaining the IRAs to them. They bring you a cake as a thank you. They also tell you that they invested the full amount into a conventional IRA 6,000 and also the maximum for their two younger children’s educational IRAs (also called a CESA) 2,000 each. How much do they invest? $2000 and 6000 for each kid

Day 39

Rudy bought too many printers for his new insurance business. He sells you one for $500. He paid $550 for the printer one month ago. He wants to take the most depreciation expense as he can. Depreciation does not matter in the same year if he returns printer and get refund. It is deductible

Day 40

You take a walk with Sarah around the neighborhood and she points out a house that her parents had owned before they died. You find out that Sarah rents this house out and receives $1,000 rental income for it. Her expenses average $600 a month. She serves as the landlord and doesn’t use a management company. She has been the owner since August 1st. it is gain, have separate form for this

Day 41

Sarah comes over and complains to you that Rudy had invested in this investment that didn’t sound good to you and he ended up losing $10,000. Sarah is also upset that a diamond necklace that she had inherited was stolen. What questions would you ask Sarah to know how these should be reported. Include her answers so you can create the return. It is loss on schedule D IRA

Skip some days ahead – you don’t see Sarah and Rudy much because everyone is busy with school and work.