Issue Identification o Jeff $25000 non-accountable allowances is counted as part of his income. His total income is $140,000.

o The 7000 Shares of Zynga has no tax effect since Jeff has yet to realize a gain or loss through the sell of the security. o Anna Marie doesnt qualify as a child because she fails age test, not younger than 19 and doesnt go to school. And she doesnt qualify for the relative dependency test either because she earns more than $3700 (exemption). Files own single return not dependent of anyone. o Texas Governor Campaign contribution is not deductible o Ivy qualifies for home office expenses because she isnt an employee of the people hiring her. Plus her house is her main place of business and physical business location where she works. o Ivy during the year participated in a like-kind exchange of land. She received $10,000 in addition to the new plot of land. So form 8824 was filled out and she recognizes $10,000 for this year.

Documentation Biographical Information o Jeff J. Bell 111-11-1111, 07/01/1968 o Ivy N. Bell 123-45-6781, 03/20/1969 o Anna Marie Bell 123-45-6784, 05/02/1991 o Tyler Bell 123-45-6788, 06/30/1994 o Jeff J. Bell (42) and Ivy N. Bell (41) Married Filing Jointly o 4326 Orange Blossom Trail, Dallas, TX 75080 Jeff, Regional Manager for Rest Inn Salary, $95000 plus bonus $20000 - income wages W2 Paid travel allowances of $25,000 per year to cover expenses, not accountable. Gross Income - $140000 $4600 contributed in 2011 for medical coverage W2 DD Voluntary 401k plan, Jeff didnt contribute No tax effect Company provides office for Jeff No tax effect Airfare $10,100 Form 2106 Lodging: not at a Rest Inn $4,200 Form 2106 Lodging: value of stays at a Rest Inn $3,300 No effect Meals $900 (50%) Form 2106 Entertainment $850 (50%) Form 2106 Federal withheld $35,000 on W-2 7000 shares of Zynga for $20.50 each, stocks worthless by December 2011 Gain/Loss not realized, not tax effect

Ivy, self-employed architect Professional activity code 541310 Business Code Drafting supplies $15,000 Schedule C COGS Reproduction materials (e.g., molds, models, photos, blueprints, copies), $24,000 Schedule C COGS On-site work clothing (e.g., hip boots, safety glasses, safety helmet), $3,000 Schedule C Occupation fee $1,000 Schedule C Subscriptions to professional journals $500 Schedule C Dues to professional organizations $250 Schedule C o Exchange tract of land for another tract + 10,000 taxable $80000 consulting income Telephone Expense $1000 Mileage 4000 miles Meals and Entertainment $1000 Office Expense - $500 Other Supplies - $1000 o 8829 Office in Home (100 Square Feet of 3000 Square Feet house) Mortgage interest Percentage of $10000 (3.33%) Real Estate tax Percentage of $5800 (3.33%) Utilities Percentage of $10000 (3.33%) Repairs Percentage of $5000 (3.33%) Insurance Percentage of $2000 (3.33%) Jeff and Ivy o 2 children (Anna Marie, 19) and (Tyler, 16) - Dependent o Anna, not going to school and Tyler junior in high school - Dependent Made quarter income tax payment of $4000(estimated) Interest Income City of Clearwater bonds $3,000 Tax free Ford Motor Company bonds $10,000 1099 Int CD issued by Wells Fargo Bank $4,000 1099 Int Loan repayment by Sarah Duval, $4000 No effect Cash Gifts from Ivy parent, $12,000 No effect Federal income tax refund (2010), $10,000 No tax effect Life insurance premiums $1,000 No tax effect Medical and dental expense not covered by insurance $4,000 Schedule A medical and dental deduction Taxes: Ad valorem taxes on personal residence $5,800 Schedule A State and local sales taxes $17,000 STAX and Schedule A Interest on home mortgage $10,000 Schedule A

Contributions: Salvation Army (Tampa branch) $4,500 Schedule A Texas governor's election campaign fund $3,000 - No tax effect Gambling: During 2011, the Bells had gambling winnings of $3,200 and losses of $4,200-all supported by records. W2G and 3200 deduction for loss - Schedule A o Anna Marie income $17200 Separate income tax, Schedule C, not dependent and single Estimated 2000 miles traveling to clients Mileage deduction Estimated $600 for Cellphone, communicating with clients Estimated $500 for Supplies for her performances Estimated $300 dollars for meals with clients (50%) Estimated $1000 performance clothes