Instructions: Compute Dianes 2014 Taxable Income using the following information (assume all

expenses are incurred for the entire year, unless otherwise stated).

Background:
Diane Carl is a widower with 2 children (born March 04, 1977); Denise Carl who is 15 (born February 2,
2000) and is a dependent child and Matthew Carl who is 21 (born May 10, 1994) and attends college at
the University of Washington studying Accounting and dorms at the University. Diane has the following
sources of income and expenses:
Facts:
W-2 wages $87,500; Federal Tax Withheld of $14,650; Oregon State Tax Withheld of $9,000;
Diane pays $178/month for insurance premiums for her and her two children;
Trips to Florida to visit In-laws totaling $6,300;
Medical bills for Denise $5,700 ($2,600 reimbursed from insurance);
Dental of $1,200 ($500 reimbursed from insurance);
Vision and eyeglass wear totaling $500;
$12,700 from deceased husbands life insurance policy;
Home Mortgage Interest of $15,700 on $1,700,000 mortgage loan;
Home Mortgage on second home of $10,500 on loan of $900,000;
Tax Preparation Fees of $1,800;
Charitable Contributions to 50% deductible organizations [501(c)(3) Charities] totaling $2,700;
Matthews educational costs of $34,500, of which Diane paid $15,000 in tuition and $3,400 for
meal plans, and $9,000 in dorms (the rest was funded by scholarships, grants, and loans).
Diane has her own side business baking and selling cupcakes:
Flour and Supplies totaling $11,000 for the year all purchased in March on her American Express
Business Card (Diane plans to pay the bill in January of next year);
Eggs and other fresh ingredients totaling $7,000 for the year, also paid on her American Express
Card (Diane plans to pay the bull in January of next year);
Income of $12,000 paid by customers in cash, $7,000 accounts receivables for cupcakes sold
during the year but no money received yet, and a contract to provide cupcakes for 9 months
starting in September that was prepaid at that time for $15,000;
Vehicle expenses of $3,200 for delivering cupcakes (actual miles was 3,469 miles drives for
business, and 900 for personal);
Meals & Entertainment of $800 ($200 was to go to Disneyland with Denise);
Cell phone of $70/month for the entire year

 Purchased an oven for $7,700 in February

Replaced a tire for $80
Repaired counter tops for $200
Baking Sheets, Pots, Pans, and Whisks totaling $900 paid for by Dianes close friend, Betsy;
Trip to cupcake convention in Las Vegas totaling $1,300 (flight was $400, room and board was
$600, $300 on food and drinks).

Additional Information:
Diane received a gift of $31,000 from her deceased husbands brother;
Diane takes care of her mother, who relies on Diane for all her support and lives in Dianes home;
Dianes Gucci purse worth $5,800 was stolen ($1,000 reimbursed by insurance);
Diane rents her second home for $1,100 per month beginning in May (maintenance and repairs
totaled $1,200 for the year and she received a refundable deposit of $2,200);
Diane paid Federal Taxes last year of $19,000;
Diane deducted $8,000 last year for Oregon Taxes on her Federal Return and received a refund
from Oregon for $1,300 this year;
Diane received Interest Income from: BECU - $200; Chase - $150; HomeStreet Bank - $300; and
Edward Jones $700;
Diane received tax-exempt municipal bond income of $1,200 from her Edward Jones Account;
Diane received $11,000 of dividend income from her Edward Jones Account; $9,200 is qualified
dividends;
Diane sold her old oven for $800 cash which was acquired on January 1, 2009 for $2,500 and was
fully depreciated for tax purposes;
Diane sold 20 shares Microsoft stock purchased on February 14 th of the current year and sold on
November 10th of the current year for $900, and purchased for $700;
Diane also sold 100 Shares Starbucks for $1,000 on December 31 st of the year that was purchased
on December 30th of the last year and was bought for $800;
Diane has no capital loss carryforwards that she can utilize for the current year.