ACCT 315/715 FALL 15 HR BLOCK Problem
Davenport University
Federal Taxation I
ACCT 315/715
Instructor: Darlena L. Billops-Hil

REQUIREMENT
1. Write a tax memo/letter advising the Houghtons how to improve their tax position.
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Use the same information as the Manual problem subject to the following revisions:
The Houghtons updated their exterior windows in their primary residence last year. The new windows exceed the energy efficiency criteria established by the International Energy Conservation Code (IECC) for the climate zone. They have brought the manufacturer’s certification along. The cost of the new windows total $4,800.
Tom’s Bargain Books sold $187,000 of merchandise. They had a beginning inventory of $65,300 and an ending inventory of $89,400. All other expenses/transactions remained the same except Tom does not elect to take §179 expensing or additional first year depreciation on his office furniture purchase; but does elect to take the §179 deduction for the computer system. He made quarterly estimated Federal income tax payments of $450 on January, April, June and September, 2014 ($1,800 in total payments).
The Houghton’s sold 1,000 shares of Capp Corp stock they had received as a wedding present on June 25, 2000. The stock was worth $8 per share in January but had had dropped to $3 per share on September 3 when the Houghtons sold the stock on that date. They had been given the stock by Tom’s father, who paid $10 per share for it in 1972. Its value at the date of gift was $15.50 per share. No gift tax was paid on the gift. (The Houghton’s basis is $10 per share.)
Tom is contemplating the Affordable Health Care Act provisions and the effect they will have on his business operations. He wonders how to keep his business profitable, how to best take advantage of available tax deductions and credits and how they can plan more efficiently to minimize their tax burden while increasing their wealth.
What advice can you offer the Houghtons on how they can improve their current tax situation and improve their tax planning process for next year?
Compose a 2 page tax memo or a client letter to the Houghtons enumerating all of your tax recommendations and the reasons why the proposed changes make sense.