Taxpayer Facts

  Richard and Natalie Burns are a married couple in their early thirties. They do not have any children yet. They live in a rented condominium in Overland Park, Kansas. Natalie works as a nurse at St. Luke’s South Hospital and Richard is a 30% partner in a small engineering firm that is operated as a general partnership. They have come to your office with the following information to have their 2023 individual federal income tax completed. They provide you with the following information: 1. Copies of the following documents (available on K-State Canvas as a PDF titled, “Supporting Documents”): - K-1 from Richard’s partnership (no payments were made requiring the filing of a Form 1099, there are no prior year losses or non-at risk amounts, Richard materially participates in the partnership, and all income is considered non-passive income) - W-2 from Natalie’s job at St. Luke’s South Hospital - 1099-Int from First Bank - 1099-Int from Local Credit Union - 1099-Div from ABC Mutual Fund 2. Natalie and Richard sold their 2016 Honda Accord in 2023 for $12,000. They had purchased it for $20,000. Natalie had used it exclusively for personal driving. 3. Natalie received a gift of $40,000 from her parents late in 2023. 4. Richard’s grandfather passed away in September of 2023. Richard received $100,000 as the beneficiary on the life insurance policy. 5. In April 2023, Natalie started a part-time business from home doing consulting work for physicians’ office practices (business identification code 621399). Natalie materially participants in the business and is not eligible for a home office deduction. During the year, she collected $25,000 in consulting fees and incurred the following expenses, none of which would require Natalie to file a Form 1099 (Natalie uses the cash method of accounting): • Spent $2,500 advertising in the local medical journal. • Spent $1,500 on office supplies (not part of cost of goods sold). • Spent $750 on utilities. • Spent $800 on an occupational license. • Spent $1,900 on liability insurance. 6. Natalie and Richard made timely estimated tax payments of $23,000 during the year. 7. During the year, the Burns sold the following capital assets (assume that in all cases, the basis was reported to the IRS): Asset Acquired Sold Selling price Adjusted Basis A stock 6-02-16 10-13-23 4,200 3,500 B stock 8-6-07 3-12-23 6,000 8,000 C stock 2-10-23 11-14-23 6,000 20,000 D Stock 6-16-19 12-7-23 5,000 4,500 E Stock 7-11-23 10-10-23 5,000 4,000 Boat 10-2-15 4-25-23 4,000 10,500 Note1: The B stock was sold to Natalie’s brother. Note2: The boat was used for personal recreation. Required Prepare the Burns’ 2023 federal tax return. They have asked you to minimize their tax liability to the extent legally possible. Round numbers to the nearest dollar. Clearly state any assumptions make in completing the tax return. Include any supporting schedules. The following 2023 tax forms are required: • Form 1040: U.S. Individual Income Tax Return, pages 1 and 2 • Form 1040: Schedule 1, 2, 3 • Form 8949: Sales and Disposition of Capital Assets • Schedule C: Profit and Loss from Business • Schedule D: Capital Gains and Losses • Schedule SE: Self-Employment Taxes (use the short form)