Directions: Prepare 2015 federal income tax return, including all necessary schedules and attachments, for Barack and Michelle Obama using the following information:
Social Security Numbers: Barack- 123-45-6789, Michelle – 333-222-111
Daughters –Malia and Natasha – ages 14 and 11, respectively- SS# 555-77-6666 and 555-77-6667. Michelle paid $6,000 in child care expenses for each child while she worked.
Salary: Barack – $45,000, Michelle – $20,000
Malia and Natasha – $400 each
Interest from Mellon Bank – $3,000, Interest on Illinois municipal bonds – $1,800
Dividends on IBM stock – 6,000
Sold 1,000 shares of AOL stock for $7,000 on January 15, 2013. Shares were purchased on January 15, 1999 for $3,000.
Michelle had the following operating results from providing legal services, which she operated as a sole proprietorship:
Sales income – $12,000
Office supplies – 6,000
Advertising Expenses – 1,000
Business clothing – 2,000
Barack and Michelle rented out the old family home in Chicago for the entire year:
Rental income – $15,000, Mortgage interest – $7,000
Depreciation – The house was purchased in 12/01/13 at a cost of $200,000 and is depreciated on a straight line basis over 27.5 years. Accumulated Depreciation from prior years was $7,576.
Mortgage interest on the white house owned by Barack and lived in by family – $5,000
Real Estate taxes on the white house – $3,000;
State income taxes withheld from Barack’s wages – $4,000
Federal income taxes withheld from Barack’s wages – $6,000
District of Columbia sales tax paid by Barack was $1,700.
State income tax refund of 2014 overpayment received in 2015 – $2,000 (2014 state income taxes were fully deductible on the 2014 tax return.)
Barack had $8,000 of business travel expenses, which were paid by his employer.
Michelle paid $5,000 in college tuition for graduate school and $400 for eyeglasses.
Barack contributed $3,000 to the United Way, and $4,000 to Harvard University during the year.
Michelle paid $4,000 of student loan interest.
Notes
1. Please make up any non-financial information needed to complete the tax return that is not provided above.
2. Use 2014 IRS tax return forms where 2015 form are not yet available.
Extra Credit – To potentially assist in improving one’s grade to a “C” or “D”, complete a separate tax return for Barack and Michelle, adding the additional information found below:
Sold 1,000 shares of GM stock for $10,000 on January 15, 2015. Shares were received as a gift from mother, Ann, on January 15, 2002. Ann purchased stock on January 1, 1990 for $5,000. The value of the stock on January 15, 2002 was $3,000.
Barack received $23,000 in social security benefits during the year.
Barack paid $7,000 in alimony and $6,000 in child support to his first wife, Hilary.
Michelle’s law business purchased the following assets in 2015:
7 year equipment – $4,000 on July 31
5 year equipments – $1,000 on May 31
(Please maximize her 2015 depreciation deduction.)
Michelle’s earrings were stolen on July 12. She purchased the earrings 4 years earlier for 9,000. At time of robbery, the earrings were valued at $14,000.
Medical expenses
Dr. appointments for Barack and Michelle- $6,000
Dr. appointments for Malia and Natasha – $8,000
Prescription drugs – $1,600
Eye glasses – $600
Medical insurance premiums – $2,000
Barack and Michelle also have a twenty year old daughter, Barbara. Barbara is a full-time graduate student and Barack paid $18,000 of tuition, on her behalf. Barbara had no other expenses during the year.
Barack bought business suits for $5,000 that he wears only to the office and for official work events.
Barack pays $700 in union dues related to his employment.
Michelle paid $1,400 for professional licenses.
Barack and Michelle like to eat out and spent $5,000 at various restaurants in the D.C. area.
