Gregory R. and Lulu B. Clifden live with their family at the Rock Glen House Bed & Breakfast, Which Gregory operates. The bed and breakfast (B&B) is located at 33333 Fume Blanc Way, Temecula, CA 92591. Gregory’s Social Security number is XXXXX and Lulu’s is XXX-XX-XXXX. Both enjoy good health and eyesight.
1.The Clifdens have three sons, Gerald A. (SSN# XXXXX),Gary T.(SSN#XXX-XX-XXXX),and Glen E.(SSN#XXX-XX-XXXX). Gerald is 17 years old, Gary is 12 years old, and Glenn is 10 years old.
2.The Rock Glen House Bed & Breakfast is operated as a sole proprietorship and had the following income and expenses for the year:
Room rental income $137775
Vending machine income $2100
Advertising expense $4,810
Mortgage interest on the B&B $33010
Wages of maid $17540
Taxes and licenses $6,420
Business Insurance $6,300
Laundry Expenses $4,290
Accounting fees $1,850
Office expenses $2,400
All of the above amounts relate to the business portion of the Bed & Breakfast; the personal portion is accounted for separately. The Rock Glen House Bed & Breakfast uses the cash method of accounting and has no inventory. The employer tax ID number is XXXXX
3.The Clifdens made estimated Federal income tax payments of $2000 and estimated state income tax payments of $6,000 (all made 2017).
4.Lulu is a substitute teacher with the local school district. For the current year, lulu’s Form W-2 from the school district showed the following:
Federal income tax withheld $1,650
State income tax withheld $380
FICA (OASDI & Medicare) $787.95
5.Gregory is retired from the U.S. Navy. His annual statement from the Navy showed the following:
Retirement Income $9,300
Federal income tax withheld $1,200
State income tax withheld $290
6.Gregory and Lulu paid (and can substantiate) the following amounts during the year: MasterCard interest $1,480
California state income tax (for 2008)$450 Charitable Contributions $1,875
Mortgage interest on home purchase $7631 (Personal portion)
Real Estate taxes (personal portion)$830
Life insurance premiums $845
Investment interest $3100
Automobile registration fees$450(Deductible portion)
Tax return preparation fee $475
Contributions to George Clinton’s $1,000 Reelection campaign
None of the investment interest is related to amounts borrowed to purchase the City of Atlanta tax-exempt bonds.
7.During the year, Gregory and Lulu received the following qualifying dividends and interest: Interest:
Vintage Bank $1375
Bob’s Big Bank $375
Bank of Ireland $220
City of Atlanta Tax Exempt Bonds $1,490 Dividends:
Southwest Airlines $220
Heinz Foods $560
Also, Lulu owns Series EE U.S. savings bonds. During the year, the bond redemption value increased by $1,300. Lula has not elected the accrual method for these bonds. There were no Irish taxes paid on the interest from the bank of Ireland. All the above stocks, bonds, and bank account are community property.
8.Lulu has a stock portfolio. During the year she sold the following stock, none of which is qualified small business stock:
Orange Co. – Sales Price $6100 Basis $3800 Date Acquired 2/11/15 SOLD 6/19/17
Gold Co. – Sales Price $12100 Basis $14200
Date Acquired 3/27/17 SOLD 9/19/2017
Green Co. – Sales Price $2575 Basis $1450
Date Acquired 10/31/12 SOLD 10/23/17
9.Lulu paid her ex-husband $4800 alimony in the current year, as required under the divorce decree. Her ex-husband’s name isXXXXX and his Social Security number is XXXXX
10. Gregory does all the significant work in the Bed & Breakfast and therefore he pays self-employment tax on 100 percent of the earnings from the B&B.