individual tax 411196

Kelly and Chanelle Chambers, ages 47 and.45, are married and live at 584 Thoreau
Drive, Boston, MA 59483. Kelly’s Social Secuiity number is 254.91.9483 and Chanelle’s
is,374 48 2938. The Chamber’s have two children: Emma age23, and Chet, age 19.
Their Social Security numbers are 385 64 8496 and 385 68 9462, respectively. Emria is a
single college student and’earned $8,000 during rhe summer. Kelly and Chanelle help
Emma through school by paying for her room, board, and tuition. Emma lives at home
during the summer. Chet has a physical handicap and lives at home. He attends a local
university and earned $4,000 working for a marketing firm. In sum, Kelly and Chanelle
provide rnore than Sao/” of. both Emma’s and chet’s toial support for the year.
Kelly is a commercial pilot for a small airline. His salary is $95,000, from which
. $19,000 of federal income tax and $8,000 of state income tax were withheld. Kelly also
pays premiums for health, disability and life insurance. $2,000 of the premium was for
health insurance, $250 for disability and $400 for life insurance.

Chanelle owns Alliance Networks, a proprietorship that does network consulting.
During the year, Chanelle’s gross revenues were $23,000. She incurred the following
expenses in her business:

Liability insurance $ 700
Software rental 5,400
Journals and magazines 150
Training seminars 1,200
Supplies 1,300
Donations to a political campaign fund 800
Kelly enjoys playing guitar and plays in a band. Kelly’s band has developed a local following.
This year, his gross revenues were $1,200 for playing shows attd $700 on CD
sales. He incurred the following expenses:

Studio rent expense $ 1,300
Sound system repairs 200
CD production 500
New guitar and amplifier 800

Kelly’s father passed away during the year. Kelly and Chanelle received $100,000 from
.the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums.
chanelle purchased 100 shares of Thurston co. stock on May 1,1991, for $1,000.
_.Thurston Co. was declared bankrupt during rhe current year.
Chet’s physician recommended that he see a physical therapist to help with his disabilii!y. |:lty paid the therapist $7,000 during the year.because his insurance would not cover the bills.
Kelly and Chanelle went to Las Vegas and won $5,000 at the blackjack table. The next
night, they lost $6,000.
Kelly and Chanelle glyq $900 to their church and, during rhe year, they had the following other income and expenses:
Real estate taxes
$1,400
Property taxes on car (determined by value) 500
Home mortgage interest 9,000
Credit card finance charges 2,600
Tax return preparation fees ($600 is allocable to Chanelle’s business) 1,000
Sales tax on purchases during the year 6,200
Interest from a savings account 800
Interest from City of Boston Bonds 700
Dividend from 3M stock 400

Prepare Kelly and Chanelle’s taxreturn Form 1040 and Schedules A, B, C, D, and SE
for the current year.