Explain how Kevin and Janet took advantage of existing IRS rules to reduce taxes

I am just post that in case you need more clarification.

My first client is the Roberts family. Using the following information,
complete their tax return.

Your answer will include the following items to be submitted:

Form 1040

Schedule A, B, C, D, E, SE

Forms 4797, 8863, 4562, 8582

Below you will find the information for the Roberts family

Information for 2004

The Roberts family consists of the following:

Kevin M. Roberts, age 46, SSN 111-11-1111, Computer Consultant

Janet J. Roberts, age 44, SSN 222-22-2222, Customer Service Rep

Jill Roberts, age 20, SSN 333-33-3333, daughter and full-time student

Rosa Roberts, age 19, SSN 555-55-5555, daughter living at home

Jim Roberts, age 13, SSN 444-44-4444, son in the eighth grade

They live at 110 Pleasant Valley Lane, Aurora, Illinois 60823.

They do not want to contribute any money to the presidential election
campaign.

The Roberts will be filing as married filing jointly.

Dependents

Jill Roberts

Jill is a full-time student at an Arizona university. Kevin & Janet pay
all her expenses. As a sophomore, Kevin and Janet pay $4,600 for her
tuition.

Rosa Roberts

Rosa is 19 years old and lives with Kevin and Janet who pay all her
expenses. She will attend a community college this spring semester.

Jim Roberts

At 13 years old, Jim lives at home all year. Kevin & Janet pay all his
expenses.

Income

Janet had the following earnings on her W-2:

wages $36,916 and federal income tax withheld $4,593

Social Security wages $37,990 and Social Security tax withheld $2,355

Medicare wages $37,990 and Medicare tax withheld $551

$1046 deducted for state income tax

Janet is covered by a 401K plan, and she contributed $1,074 to her 401K.

Their $400 interest income was from Aurora Bank and $1,772 from Uptown
Bank. The $1,772 was composed of $286 from U.S. Government investments
and $1,486 from a CD that was cashed early incurring an early withdrawal
penalty of $100. There is also $4,085 of dividends from Sam’s
Brokerage Company with $542 as qualified dividends. During the year,
Kevin sold 200 shares of Harrah’s stock, which he purchased on 6/1/02
for $2,000 and sold on 8/1/2004 for $54.

Kevin received a 1099-R for a total distribution from a pension plan he
had with a previous employer. The amount received was $2,600. The
taxable amount was $2,600, and no federal tax was withheld.

Assets

Computer Consulting

Kevin owns a computer consulting business as a sole proprietor. His 2004
revenue was $85,000. On 6/1/02, Joe purchased a 2002 Audi to use in
computer consulting business. Total miles driven in the car for 2004 was
21,000 with 2,000 miles for personal use and 19,000 miles for computer
consulting related activity. He paid $285 for parking and tolls. There
were no commuting miles as he works out of his house.

During 2004, he purchased a laptop computer for $3,500 that he uses 100%
for business and a desktop computer and printer for $2,800 that he uses
85% for business.

Other business expenses for which Kevin has receipts are as follows:

advertising $730

insurance $1100

interest $2602

office expense $1286

equipment rental $502

repairs and maintenance $809

travel and entertainment $6868

computer software $4210

books and seminars $2040

dues and subscriptions $840

postage $2091

telephone $1940

Internet $2086

On 1/1/2004, Kevin sold a computer that he purchased on 6/1/1999. The
purchase price was $5,500, and the depreciation allowed was $4,500. He
sold the computer for $2,000. This is section 1245 property.

Investment Properties

Kevin owns investment property in Aurora, Illinois, and Jacksonville,
Florida. The property is Aurora is a single family home that he rents.
He has an active role in the rental of the property. Kevin has the
following information:

rental income $16,200

advertising $100

cleaning & maintenance $288

insurance $865

legal $125

mortgage interest $3,955

repairs $2,010

supplies $335

taxes $2,004

Kevin purchased the property on 6/1/1995. The cost of the home was
$111,000, and prior depreciation is $14,000. On 6/1/2000, he had a new
roof added for $14,000, and prior depreciation is $3,500. From previous
years, there was a $1,000 unallowed loss.

On 6/1/2000, Kevin purchased a condo in Jacksonville for $210,000. Kevin
does not materially participate in the rental of the condo and has a
management company oversee the condo operation.

rental income was $18,000

advertising $200

travel $2,050

cleaning and maintenance $300

insurance $655

legal fees $200

management fees $1,800

mortgage interest $4444

supplies $200

taxes $3,008

Depreciation taken on the condo in prior years was $18,010. From 2003,
there was a $2,000 unallowed loss.

K-1

Kevin’s other investments are reported to him on a K-1. He is a
partner in Stable Graphics Inc., which had active income of $2,005 and
section 179 expense of $500. He is also a shareholder in Computer
Creation Company, which is an S corporation. He had passive income of
$555.

401K

Kevin made a contribution of $2,500 to his IRA even though Janet had an
employer retirement plan.

Other Data

Kevin had gambling winnings of $5,500 and Janet had $1,600. Their
combined losses were $4,750.

Real estate taxes on Kevin and Janet’s residence were $3,806, and
mortgage interest was $11,018.

Cash gifts to church were $1,470, and they contributed clothing and
furniture to the Salvation Army with a cost of $4,500 and a fair market
value of $1,200.

Kevin and Janet carried over a $300 federal tax refund from 2003 and
made an estimated payment of $600 on 2/15/05 for the year 2004.

Healthcare expenses are as follows: $3,144 for self-employed health
insurance for Kevin, Janet, Jill, and Jim; $1866 for payments to
doctors; $1,300 for payments to dentists; and $425 for medical aids.