BNA INCOME TAX™ PLANNER - Bloomberg BNA · PDF fileprograms and materials subsequently...

Tutorial.book Page i Thursday, October 29, 2015 8:26 AM

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

BNA INCOME TAX™ PLANNER

TUTORIAL

Version 2015.2November 2015

byKENNETH S. COHENNew York University (B.S., Public Accounting, 1964)The Harvard Law School (LL.B., 1968)Admitted to Ohio Bar 1969 (Inactive)

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Tutorial.book Page ii Thursday, October 29, 2015 8:26 AM

©1994-2015 BNA Software, a division of Tax Management Inc.,Arlington, VA 22202. All rights reserved.

ISSN: 2169-8772

BNA and BNA Income Tax are either registered trademarks or trade-marks of The Bureau of National Affairs, Inc.

Subject to the terms and conditions of the BNA Software License Agreement.

This publication is designed to provide accurate and authoritative infor-mation in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal or accounting advice or other expert assistance is required, the services of a competent profes-sional should be sought. The program material contained in Bloomberg BNA’s BNA Income Tax Planner software and manuals are supplied without representation or warranty of any kind. Tax Management Inc. and the author, therefore, assume no responsibility and shall have no liability, consequential or otherwise, of any kind arising from the use of the program software, manuals, any part thereof, or any supplementary programs and materials subsequently issued by Bloomberg BNA.

Duplication of this manual supplement, in part or in whole, is prohibited without express permission of Bloomberg BNA.

Printed in the United States of America

Co

nte

nts

Co

nte

nts

Co

nte

nts

Co

nte

nts

Co

nte

nts

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Tutorial.book Page iii Thursday, October 29, 2015 8:26 AM

CONTENTS

Introduction ........................................................................................................................ 5How to Use the Tutorial ................................................................................. 5Getting Additional Help .................................................................................. 6Before You Start ............................................................................................ 6

Navigating the Workspace ........................................................................ 6Using the Mouse .................................................................................. 6Using the Keyboard .............................................................................. 7

Accessing Worksheets ............................................................................. 8Input vs. Calculated Rows ........................................................................ 9Using Menus ............................................................................................. 9Changing Entries ...................................................................................... 9Using the Help System ............................................................................. 9

Accessing Help for the Current Row .................................................... 9Accessing Other Help Messages ....................................................... 10Other Help Features ........................................................................... 10

Input Methods ......................................................................................... 10Startup .................................................................................................... 11Other Helpful Resources ........................................................................ 12

Operations Guide ............................................................................... 12Tax Reference Guide ......................................................................... 12

Worksheet Status ................................................................................... 13Correcting Entry Errors ........................................................................... 13Leaving and Closing Worksheets ........................................................... 13

Scenario 1: Years w/n Cases, Security Transaction Analyzer, Print & Save ............... 15Facts ............................................................................................................ 15Running the Scenario .................................................................................. 16

Assumptions Dialog ................................................................................ 16Main Worksheet ...................................................................................... 20

Filing Status ........................................................................................ 21Auto Copy Within A Case ................................................................... 21Ordinary Income Worksheet ............................................................... 22

Wages Worksheet .................................................................................. 22Dependent Care Exclusion & Credit Worksheet ..................................... 23Sorting the Worksheet List ...................................................................... 24

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Tutorial.book Page iv Thursday, October 29, 2015 8:26 AM

Viewing Multiple Worksheets Simultaneously ........................................ 24Title Bars ............................................................................................ 27The Escape Commands ..................................................................... 27

Interest and Dividends Worksheet .......................................................... 27IRA Deductions Worksheet ..................................................................... 30Leaving Worksheets: Closing, Minimizing, Leaving Open ...................... 32Security Transaction Analyzer Worksheet .............................................. 33Itemized Deductions Worksheet ............................................................. 36Alternative Minimum Tax Worksheet ...................................................... 38Child Tax Credit Worksheet .................................................................... 40Completing the Main Worksheet ............................................................. 42State Estimated and Withholding Worksheet ......................................... 42Resident State Estimated & Withholding Payments Worksheet ............. 43Saving Client Data .................................................................................. 47Printing the Results (A Formatted Report) .............................................. 48

Scenario 2: Sale of Stock, Present Value & Graph ........................................................ 51Facts ........................................................................................................... 51Running the Scenario .................................................................................. 51

Assumptions Dialog ................................................................................ 51Capital Gains and Losses Worksheet ..................................................... 53Present Value Worksheet ....................................................................... 54Using the Graph ...................................................................................... 56Printing the Graph ................................................................................... 60Clearing the Worksheets and Starting a New File .................................. 60

Scenario 3: Cases w/n Years, Individual Activities & Client Letter .............................. 61Facts ........................................................................................................... 61Running the Scenario .................................................................................. 62

Deactivating the State Tax Worksheet ................................................... 62Assumptions Dialog ................................................................................ 62Main Worksheet ...................................................................................... 64Ordinary Income Worksheet ................................................................... 64Individual Activity Worksheets ................................................................ 65Itemized Deductions Worksheet ............................................................. 74Saving the File ........................................................................................ 75Client Letter ............................................................................................ 76

Main Tool Bar ..................................................................................... 76Client Letter Tool Bars ....................................................................... 76Linking Data from Worksheets ........................................................... 80Print Preview ...................................................................................... 82Changing the Font in the Body ........................................................... 83

Saving the Letter as a Template ............................................................. 84Exiting the Program ................................................................................ 84

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Tutorial.book Thursday, October 29, 2015 8:26 AM

INTRODUCTION

HOW TO USE THE TUTORIAL

This chapter takes you step-by-step through three different tax planning scenarios to illustrate the use of the program. The scenarios cover the follow-ing situations:

SCENARIO 1 A two-year projection for a married couple filing jointly, using several subsidiary worksheets, including the Security Transaction Analyzer. This scenario also illustrates how to enter incentive stock option (ISO) data into the program.

SCENARIO 2 Expands the analysis to two cases and examines the consequences of selling stock in two different years using the Present Value worksheet. The Graph feature is also demonstrated.

SCENARIO 3 A multiple-case projection for a single taxpayer to determine the tax advan-tages of selling one passive activity over another. This scenario also illustrates using the individual activity worksheets to enter information from 1099s and K–1s, and how to use the Client Letter feature.

After working through the scenarios you’ll be generally familiar enough with operating the program to use it easily for real-life situations. Please note, however, that the scenarios refer to specific situations and do not illustrate how to use all of the program’s worksheets and features. Refer to the sections following the tutorial for help with specific information not covered in the scenarios.

Note: The scenarios in this Tutorial were created with program version 2015.2. If you run the scenarios with a later version of the program, your results may differ slightly from those shown here because of inflation adjustments and other subsequent changes.

For scenarios 1 and 2, the resident state is New York. For scenario 3, the state worksheet is killed.

Before we begin the scenarios, however, we will briefly discuss how to navigate within the program using the various parts of your keyboard, the

5

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


menus, and the windows. We will also cover the help messages and the various input methods.

For information concerning Windows operations, please refer to your Microsoft Windows manuals.

GETTING ADDITIONAL HELP

In addition to the information presented in this manual, you can view help messages online using any of several methods.

Click the word “Help” on the menu bar at the top of the window to drop down the Help menu. Then click Help for Current Row to call up the help message for that row.

Alternatively, you can use the keyboard to call up a row’s help message. While the cursor is in the worksheet row, just press the F1 key.

BEFORE YOU START

NAVIGATING THE WORKSPACE

This section briefly covers using the mouse, the numeric keypad, and the cursor arrow keys to move around the workspace and to enter data.

USING THE MOUSE

You can use the mouse to do a number of tasks within the program, from opening a worksheet, a menu, or a dialog to selecting commands and options. To select something using the mouse, position the mouse pointer on it and press the left mouse button. Some basic ways to use the mouse are:

To open a menu, click the menu name in the menu bar. Unless stated otherwise, any time you read “click” in these instructions, you press the left mouse button.

To select a command from a menu once you open it, position the mouse pointer on the command within the list then click on it.

To use the toolbar for quick access to many common program functions, simply click the toolbar icon you want to use. Toolbar icons provide an easy way to open, save, and print client files, add notes to worksheets, use calculator functions, and select worksheets.

6

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


To move to a particular cell in a worksheet, move the plus-shaped mouse pointer to the cell then click on it.

To move from one open worksheet to another, if the destination worksheet is at least partially visible, position the mouse pointer anywhere on the destination worksheet, then click on it. Or, click the appropriate tab for the worksheet you want to see (the program displays a tab identifying each opened worksheet).

To move from an open worksheet to another when the destination worksheet is hidden, click on the Worksheets menu, then click the name of the desired worksheet on the list at the bottom of the menu. Or, click the appropriate tab for the worksheet you want to see.

To open a subworksheet from a worksheet row (except a calculated row), double-click (quickly press the left mouse button twice) anywhere on the row.

USING THE KEYBOARD

NUMERIC

KEYPAD

Since most of data entry is numeric, you may prefer to use the numeric keypad on the right side of the keyboard to enter numbers. The Num Lock key turns the numeric keypad on and off. When the numeric keypad is on, you may use it to key-in numbers as you would a ten-key calculator. You may find it convenient to leave Num Lock activated all the time and use the numeric keypad as your primary means of data entry.

CURSORCONTROLS

Use the cursor arrow keys and the Enter key to control the cursor and move it up, down, left, and right, respectively.

SHORTCUTAND OTHER

KEYS

The program provides several shortcut keys that allow you to bypass the menu system by pressing one or two keys to run program functions. For example, just press X when in a cell to see the Summary Report output worksheet.

One important shortcut key is the Esc key, which is typically located at the top left corner of the keyboard. Pressing the Esc key returns you to the previous window (for example, from a subworksheet to the previous worksheet) and saves any changes you made to that window. You can also use the Esc key to clear a program message from the screen.

Shortcut keys are listed on the right side of the menus. You generally cannot use the shortcut keys listed on a menu while the menu is open. Instead, if you prefer to use the keyboard instead of the mouse, you would press the under-scored letter of the menu command. On the Edit menu shown below, Ctrl+C is the shortcut key combination for Copy, and C is the letter you would press to activate copy from the menu.

7

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


We will explain the commands and their corresponding shortcut keys that you use to run the scenarios in this Tutorial at the time you use them. Commands and shortcut keys that are not addressed in the Tutorial are covered in detail in the program’s help system.

ACCESSING WORKSHEETS

Access rows are designated with a worksheet icon:

(active worksheet icon)—indicates that a subworksheet has been activated

(inactive worksheet icon)—indicates that a subworksheet is available but inactive for that row

You can access a worksheet by double-clicking the row or, when the cursor is on an access row, by pressing W. (For more information, see Worksheet Status on page 13.)

You can also access a worksheet by double-clicking the worksheet item on the Worksheet List. (If the Worksheet List is not displayed, click on the toolbar.) Or, when the Worksheet List is not displayed, you can access a worksheet by pressing Ctrl+W to display the Select Worksheet dialog.

mEditMenu.png

To get the Edti menu ready for capture:1 Make an entry in a worksheet.2 Copy the entry to clipboard

8

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


INPUT VS. CALCULATED ROWS

Input rows are the rows that allow you to enter data. Calculated rows are automatically populated by the program; you cannot type data into calculated rows. Input rows are a different color than calculated rows. To change the appearance of input and calculated rows, click Colors on the Options menu.

USING MENUS

In addition to the toolbar, the program uses a menu system to access the tax planning worksheets and various program functions. The major menus are accessed through the menu bar at the top of the window.

CHANGING ENTRIES

When you make an entry in a numeric cell, the program usually writes over any existing entries in the cell, effectively erasing the previous entry.

When you make an entry in an alphanumeric cell, the program is in insert mode and therefore adds your entry to the end of the existing entry in the cell. A flashing cursor bar shows where your entry will be inserted within the cell (this place is called the insertion point).

Using the Edit Cell command on the Edit menu (F2) allows you to make changes to cell entries — you can move the insertion point within a selected cell and insert characters to the left of the insertion point as you type.

USING THE HELP SYSTEM

The program has a full-featured help system that allows you to access Help on a variety of subjects — from Help for a particular row item to Help for a specific worksheet, to operational Help on the various program commands, options, and features.

ACCESSING HELP FOR THE CURRENT ROW

When the cursor is on any row of the Main Worksheet or a subworksheet, you can press F1 to call up the definition of the row item. Or you can click Help on the menu bar, then select Help For Current Row.

A Help window containing the definition of all input rows on the current worksheet will open with the focus on the row from which you accessed Help. (For Federal worksheets, help is available on all rows, input as well as calcu-

MenuBar.png

9

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


lated.) The Help information for a row item will be displayed at the top of a Help window. It will include references to Internal Revenue Code sections or IRS form line numbers. You can scroll up and down through the Help information.

LEAVING HELP You can leave the help system open and return to the program by clicking anywhere on the program workspace or by using the Window’s short-cut keys Alt+Tab. Leaving the help system open allows quicker access the next time you request help.

CLOSING HELP To close the Help window, press Alt+F4 or click the Close icon in the upper-right corner of the window.

ACCESSING OTHER HELP MESSAGES

You can access help for items other than the current row by selecting Contents or Search For Help On from the Help menu. Selecting Contents will present a table of contents which you can browse and use to look up information. Selecting Search For Help On allows you to specify keywords that the program will use to determine your area of interest and present you with a selection of topics from which to choose.

Most dialogs also have Help buttons which, if selected, will take you to a Help window tailored for that dialog. You can also press F1 to access Help while in a dialog.

OTHER HELP FEATURES

Just like most other Help windows for Windows applications, the program’s Help window has its own menu bar and menu commands, including File, Edit, Bookmark, Options, and Help. You can print the help topic using the Print Topic command on the Help window’s File menu. You can force the program Help window to be displayed on top of all other windows using the Keep Help on Top command on the Help window’s Options menu.

INPUT METHODS

You can enter your data directly on the individual worksheets and subwork-sheets or you can use the single worksheet that contains all the input rows of all the other worksheets (e.g., the Batch Input Worksheet). You can also use a combination of the regular worksheets and the Batch Input Worksheet. All data is posted back and forth from the regular worksheets to the Batch Input Worksheet and vice-versa.

Individual row descriptions are found in the Tax Reference Guide. The tutorial scenarios use only the worksheet input method. For detailed instructions on

10

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


using the batch input feature, see the Batch Input section in Chapter 6 of the Operations Guide.

Now you’re ready to put the program to work.

STARTUP

If you haven’t already done so, install the program as described in the installa-tion instructions that accompanied your program CD.

To start the application, click Start > Programs > BNA Income Tax Planner > BNA Income Tax Planner. Or, double-click the BNA Income Tax Planner icon:

The first screen you see is the program title screen. This screen closes to reveal the main application window, which displays the Main Worksheet:

iconBNAIncomeTaxPlanner.png

BNAIncomeTaxPlannerWindowDefaultView.png

11

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note: Note that the row numbers appear on the worksheet. The View Worksheet Row Numbers command on the Options menu is selected by default. Viewing the row numbers helps when referring to rows in this Tutorial, and it helps when reading help topics, many of which refer to row numbers.

Notice that the first item on the worksheet is highlighted with a rectangular bar in reverse video—the active cell. The active cell is where your entries are entered. You can usually change which cell is active by using the same keys (Down arrow key to move down; and Up arrow key to move up) that you’d use to manipulate a blinking cursor bar. You can also activate a cell by clicking on it.

Now, move the mouse pointer right and left across the window. Notice that the mouse pointer is arrow-shaped ( ) when it is off the worksheets and changes to a plus shape ( ) when it is on a worksheet.

The arrow-shaped mouse pointer appears on the menus, the menu bar, scroll bars, and Worksheet List. You use this pointer to point and select items, or to drag windows to new locations on the screen.

The plus-shaped mouse pointer appears when the pointer is positioned on any worksheet cell or row title. You use this pointer to click and select a cell or to click and drag to select a range of cells.

OTHER HELPFUL RESOURCES

OPERATIONS GUIDE

Most of the menu selections on the menu bar will be covered in this Tutorial, but they’ll be applied to specific situations and won’t, therefore, cover the full range of use. For a full description of when and how to use each menu and its items, see the Operations Guide, accessible on the program Help menu.

TAX REFERENCE GUIDE

For descriptions of the program worksheets and what to enter for each item on the worksheets, see the Tax Reference Guide. It also explains how the program computes the amounts in calculated rows, and it contains tax calcula-tion information for both federal and state taxes. The Tax Reference Guide is printed every year and shipped with the program CD for the annual Fall program release.

Throughout the year, updates to the Tax Reference Guide will be provided in the Tax Reference Guide Supplement, a PDF file available on the program’s Help menu.

12

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

Intr

od

uct

ion

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


WORKSHEET STATUS

ACTIVE The program can post amounts to the calculated rows of an active worksheet. An active worksheet can be open or closed.

INACTIVE An inactive worksheet is one that you either have not opened or have killed. The program cannot post amounts to the inactive worksheets. Inactive worksheets are always closed.

OPEN An open worksheet is a worksheet that you have called up. An open worksheet can be visible in a window or minimized as an icon (like this ) within the program workspace. Since open worksheets are always active, the program can post amounts to them.

CLOSED A closed worksheet is a worksheet that does not currently exist in a window or as an icon within the program workspace. Closed worksheets can be active or inactive. If a closed worksheet is active, the program can still post amounts to it. (Note that the Main Worksheet cannot be closed.)

CORRECTING ENTRY ERRORS

There are several methods to correct entries.

If you make a mistake while entering data, use the Backspace key to erase your entry one character at a time. To restore a numeric cell’s previous value you can either press C or select Clear Or Restore Prior Value from the Edit menu.

If you pressed Enter before noticing the mistake, first click the item you want to change. Then, if the cell is numeric, you can enter the correct amount. The new entry automatically overwrites the old. If the cell is alphanumeric, you must use the Backspace and Delete keys to remove any incorrect characters. Alphanu-meric entries are not automatically overwritten; entries in alphanumeric cells are inserted at the insertion point.

You can also reverse the previous entry in numeric cells after pressing Enter: just press Ctrl+Z or select Undo Last Entry on the Edit menu. A program message will report the changed value. You cannot, of course, change amounts in calculated rows, but when you change any entered row, the worksheet is immediately recalculated and displays the changes in all visible worksheet rows.

LEAVING AND CLOSING WORKSHEETS

Client data is entered in cells on open worksheets. The Main Worksheet is open when you start the program. When you’ve finished entering data on a

13

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


worksheet, you can leave one worksheet and go to another using any of a variety of methods.

LEAVING THEWORKSHEET

OPEN

If you have opened several worksheets and want to switch between open worksheets, click anywhere on the destination worksheet (if you can see the worksheet on-screen). Or, click the worksheet tab. Or, click Worksheets on the menu bar then select another open worksheet from the list at the bottom of the menu. Or, if you are opening a new subworksheet of the current worksheet, double-click (or press W) on the row for that subworksheet.

To leave a subworksheet and return to its parent worksheet, click on the destination worksheet or press Esc. By default, the worksheet you are leaving will remain open.

CLOSING THEWORKSHEET

If you want the current worksheet to close when you leave it, click the Close icon or press Ctrl+F4. The worksheet is still active (that is, the program still posts to the calculated rows of the worksheet) but it is no longer visible within the workspace.

If you want the program to close all worksheets when you escape from them (with the exception of the Main Worksheet, which is always open), select the Close On Escape command on the Worksheets menu. Then, when you are finished with a worksheet, press Esc. To close all worksheets at once, click the Close All Subworksheets icon on the toolbar.

MINIMIZINGTHE

WORKSHEET

If you want the current worksheet to be minimized into an icon, click on the Minimize icon (in the upper-right corner of the worksheet). If you want the program to minimize all worksheets when you escape from them, select the Minimize On Escape command on the Worksheets menu and, when you are finished with a worksheet, press Esc.

If you have the Fifty States program edition and want to minimize the state worksheets and view only the federal worksheets (or vice versa), click the View Federal Worksheets icon (or one of the View...State Worksheets icons) on the toolbar.

Now let’s take a look at the first scenario.

View Resident State Worksheet icon

View Other Nonresident State Worksheet icon

View NY Nonresident State Worksheet icon

14

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


SCENARIO 1

YEARS W/N CASES, SECURITY TRANSACTION ANALYZER, PRINT & SAVE

Scenario 1 illustrates how to use the subworksheets, including the Security Transaction Analyzer, and the Summary Report output worksheet. It also shows how to print and save client data.

FACTS

John and Mary Jones come to you wanting to know what their federal tax liability is likely to be for the next two years. The Joneses’ financial situation is as follows:

STATUS John and Mary have two dependent children under age 10 and file a joint return.

INCOME They are both employed. John expects his 2015 salary to be $75,000, but to drop to $69,000 in 2016. Mary expects her salary to increase annually by 6 percent from its 2015 base of $59,000. They anticipate receiving annual interest income of $3,000 from National Savings Bank, $5,000 from American Bank, and $4,000 from Chase Savings and Loan, as well as annual dividend income of $2,600.

IRACONTRIBU-

TIONS

John will make the maximum annual IRA contribution in 2015 of $5,500 and the same amount in 2016. Mary is covered by a company pension plan in 2015, but will not be covered in 2016 because she is changing jobs. Mary will not contribute to any kind of IRA in either year.

15

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


STOCK The Joneses have five stocks that they wish to sell in 2015 or 2016. They also expect to sell stock from an incentive stock option (ISO) that they exercised early in 2015. They plan to sell the ISO stock towards the end of 2016 to satisfy the one-year holding period requirement.

EXPENSES Total 2015 medical expenses are $9,700 and are expected to be about the same for 2016. They plan to make annual charitable contributions of $3,500. They will also pay mortgage interest of $15,000 on their principal residence and $4,000 of residential property taxes annually.

CHILD CAREEXPENSES

The Joneses are entitled to a dependent care credit each year for their $8,000 of child care expenses for their two children. The program will determine whether the Joneses also qualify for the child tax credit created by the Taxpayer Relief Act of 1997.

OTHERINFORMATION

In addition to the tax preference item from exercising the ISO in 2015, the Joneses will also have a tax preference item of $2,100 for accelerated depre-ciation for both years of the analysis period.

For the purposes of the calculation, John and Mary ask you to assume that all income and deductions will remain the same for the two years of the analysis (except salary).

RUNNING THE SCENARIO

The instructions on the following pages take you step-by-step through the process of entering the Joneses’ tax data to find their tax liability for 2015 and 2016.

When you launch the program, the Main Worksheet is displayed within the program workspace. If you also have the Fifty States program edition, you may see a message telling you that your state’s specifications have been loaded. The message closes after a moment.

Note that the defaults are Joint filing status and a 2-case, 3-year analysis beginning in 2014. To match the facts of the scenario, we need to change these defaults. The Assumptions dialog allows you to specify these defaults as well as some other basic information about the case being analyzed.

ASSUMPTIONS DIALOG

1. Click Assumptions on the Menu bar (or press Alt+A) to open the Assumptions dialog.

16

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note. If you want to move the Assumptions dialog to see more of the window behind it, click the title bar of the dialog, drag it to a new position on the screen, and then release the mouse button. You can move any active window around in this fashion, including the Main Worksheet window.

Note that some fields already have entries, which are the current default assumptions. Make the following entries on the Assumptions dialog, pressing Enter after each entry. If you move to the next field without typing anything, the default entry remains in that field.

2. In the Client Name field, type:

John and Mary Jones

then press Enter (or click the next field).

3. The next section — Years and Cases — allows you to specify one of five types of analysis:

Years Within Cases (the default selection)

Cases Within Years

Adjustment

Taxpayer & Spouse

Difference

Press Enter to accept the default selection of Years Within Cases.

4. You can specify any combination of cases and years up to a maximum of twenty (20) columns. For the Joneses’ case, we will begin with one case covering two years and expand the analysis later to two cases when we examine the stock sale.

The Number of Cases in Analysis field has a default of 2 which the program will use unless you enter another number. Since there is a drop-down list in this field, there are several methods available to change the number in this box. Use any of the methods described below to specify 1 as the Number of Cases in Analysis.

a. Press the up arrow key one time.

b. Click the drop-down arrow to open the cases list box. The current selection of 2 will be highlighted, but the number you want (1) will not be visible. Note the scroll bar to the right of the list. You can click once on the scroll arrow at the top of the scroll bar to make the 1 visible, then click 1. Or, you can click and drag the scroll box up, then click 1.

17

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


c. Type 1 multiple times (the program will bring up the 10 first, then 11 through 19, then 1).

(When we later expand the analysis to two cases, we will also use the Case Titles button to enter individual headings for each case.)

To move to the next item, press Enter (or click the next field).

5. The Number of Years in Analysis field is now highlighted. Use any of the methods described in the previous step to specify 2 as the Number of Years in Analysis.

6. In the First Year of Analysis field, change the default entry to 2015.

7. The scenarios in this tutorial mainly consider the federal income tax calcu-lation. This scenario assumes the Joneses are New York state residents and that the estimated state tax amounts we will enter on the Main Worksheet are the amounts calculated by the New York State specifica-tions in the Fifty States program edition.

If you do not have the Fifty States program edition, skip to step 8, below, and note for now that the Main Worksheet allows you to enter an estimate for state income taxes, and those numbers will be provided at the end of the scenario. Also note that your numbers may vary as we go along because of the interplay between the federal and state numbers.

If you have the Fifty States program edition, specify the resident state as follows:

a. Click the Resident State button on the Assumptions dialog. The Choose Resident State Spec dialog opens.

b. Scroll down and click nystate.st.

Drop Down Arrow

dAssumptionsNumberOfCasesInAnalysis.png 170 dpi

Scroll Bar

18

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


c. Click OK on the dialog to close it. A message opens informing you that the selected state specifications have been loaded.

The selected resident state specification amounts will be calculated and entered automatically.

d. Click OK on the message to return to the Assumptions dialog.

8. The remaining sections — Annualization and Minor Child — do not apply to the Joneses’ case. The completed Assumptions dialog looks like this:

Note. If you plan to take advantage of the client letter feature of the program, it is a good idea to click the Client Address button on the Assumptions dialog, then complete the Client Letter Address & Saluta-tion Name dialog for the client. Once you enter the address and salutation here, you can have the program include it automatically in your client letter. For details, see Chapter 8 of the Operations Guide.

Click OK to close the Assumptions dialog.

Caution! Do not press Esc on the Assumptions dialog. Doing so will cancel all your entries, restore the original default entries, and return you to the Main Worksheet.

The Main Worksheet now has two columns (2015 and 2016), reflecting the changes on the Assumptions dialog.

dAssumptions.png

19

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


MAIN WORKSHEET

We will enter the data for this scenario through the Main Worksheet and subworksheets.

Note that some rows have an icon indicating the row type:

(active worksheet icon) – indicates that a subworksheet has been activated

(inactive worksheet icon) – indicates that a subworksheet is available but inactive for that row

You can access a subworksheet by double-clicking the row or, when the cursor is on an access row, by pressing W. For more information, see Worksheet Status on page 13.

The following subworksheets (and their supporting worksheets) are activated automatically when you start the program:

Standard Deduction

AMTI (Alternative Minimum Taxable Income) Net of Exemption

Alternative Capital Gains Tax

Tentative Minimum Tax

Nonrefundable Credits

Self-Employment and Other Taxes

Federal Withholding and Estimated Taxes Paid

wiMainWorksheetScenario1a.png

20

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


State Tax <<Fifty States program edition>>

The 2015 Filing Status cell is highlighted, showing that it is the active cell.

FILING STATUS

The codes for the seven different filing statuses are displayed when you click a cell on the Filing Status row and click the drop-down arrow. For explanations of the codes, click Help For Current Row on the Help menu or press F1 while the cursor is on the Filing Status row.

The filing status codes are:

Note that the inactive worksheet icon next to this row indicates that a subworksheet is available. In addition to the filing status, the Filing Status worksheet contains items needed for taxpayers who must itemize, as well as the additional standard deduction option for taxpayers who are over 65 or blind. Also, to properly compute includible social security benefits for married taxpay-ers filing separately and a few other computations, this worksheet allows you to specify whether the taxpayer and spouse lived together at any time during the year.

1. Since none of these items apply to the Jones’ situation, simply press the down arrow key to accept the default filing status of Joint. This automati-cally accepts the same filing status (Joint) in the remaining columns of the row, and the next row – Personal Exemptions – becomes the active row.

AUTO COPY WITHIN A CASE

2. In the first column (2015) of the Personal Exemptions row, enter 4, then press A to automatically enter the same number in the next column (2016). (Alternatively, you could select Auto Copy Within A Case on the Edit menu.) The cursor moves to the next input cell, the 2015 column of the Ordinary Income row.

Codes Filing Status

1 S Single

2 J Married Filing Jointly

3 M Married Filing Separately

4 H Head of Household

5 T Trust

6 E Estate

7 Q‘ Qualifying Widow(er)

21

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


ORDINARY INCOME WORKSHEET

3. Double-click the Ordinary Income row or press W to open the Ordinary Income worksheet.

Several of the subworksheets for ordinary income items will be illustrated here — Wages, Interest and Dividends (including a custom worksheet for Other Interest), and IRA Deductions.

4. The inactive worksheet icon next to the first row of the worksheet indicates that a subworksheet is available for entering wages.

We want to enter John’s and Mary’s salaries separately, so double-click the Wages row (or press W) to open the Wages subworksheet.

Note. As you open new subworksheets, tabs for each worksheet appear under the Toolbar and above the worksheet windows. At the same time — in the Worksheet List to the left of the worksheet pane — the icons for the opened worksheets change color (from a yellow icon for inactive worksheets to a icon folder for open and active worksheets). For example, the Wages item in the list is now highlighted and its icon is blue.

WAGES WORKSHEET

1. On the first row of the Wages worksheet, Taxpayer’s FICA Wages, enter John’s salary for 2015 and 2016 as $75,000 and $69,000, respectively. Press Enter after each entry.

2. Move the cursor to row 7, Spouse’s FICA Wages, (click on the cell or press the down arrow key until the cursor moves to the cell) and enter Mary’s $59,000 salary in the first (2015) column and press Enter.

3. To increase Mary’s salary automatically by 6% for 2016, press I in the second column (or select Increase By Constant Or % on the Edit menu).

The screen will display “I =”. Press 6 followed by P or %. The program automatically changes a “P” entry to a “%” sign. The entry looks like this:

4. Now press Enter. The increased amount of $62,540 entered automatically in the second (2016) column of row 7.

When you press Enter, the Total Wages row is automatically updated with the new amounts (134,000 and 131,540, respectively).

Note that the title and amounts for row 13 “Total Wages” are a different color than the other rows. This color indicates that the row is calculated. You cannot directly change the amounts in calculated rows, although you

wiWagesScenario1a.png

22

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


can highlight them for cutting and pasting into a client document created with another program or into other input rows in this program.

5. Double-click row 5 “Taxpayer’s Dependent Care Inclusion” to open the Dependent Care Exclusion & Credit worksheet.

DEPENDENT CARE EXCLUSION & CREDIT WORKSHEET

Since neither John nor Mary received employer-provided dependent care benefits, we will simply enter the necessary information to enable the program to compute the allowable dependent care credit. (If John or Mary had received employer-provided benefits, we would enter the benefit amount and the program would automatically compute the amount of the benefit inclusion.)

1. The Joneses have two qualifying children. In the first column (2015) of row 1 “# of Qualifying Individuals”, enter 2 and press A to carry this value to the 2016 column.

2. Enter the dependent care expenses incurred for each year. In the first column (2015) of row 3 “Current Year Expenses Incurred”, enter 8,000 and press A.

n the

3. Click on the subworksheet to close it. The top portion of the Wages subworksheet looks like this:

wiDependentCareExclusion&CreditScenario1.png

23

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


SORTING THE WORKSHEET LIST

In this tutorial, the Worksheet List (the left pane) is sorted by worksheet name. If your Worksheet List is sorted by structure and you’d like to match the tutorial, follow these steps:

1. Right-click anywhere in the Worksheet List.

2. Select Sort on the shortcut menu.

3. Select Name.

4. Click OK.

VIEWING MULTIPLE WORKSHEETS SIMULTANEOUSLY

As you enter data on one worksheet, the program updates the other worksheets at the same time to reflect your changes. To see these changes, you can switch from one worksheet to another or you can close and open worksheet windows. Or, as demonstrated in this section of the tutorial, you can use the program worksheet arrangement commands (on the Worksheets menu) to display all open worksheets within the workspace simultaneously:

1. To see more of the worksheets, let’s hide the Worksheet List. On the Options menu, click the View Worksheet List Left command (to deselect it).

2. Next, open the Worksheets menu:

wiWagesScenario1b.png

24

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that the current worksheet (the one that has the focus) has a check mark next to its name. In this case, the Wages worksheet has the focus.

The commands in the second section of this menu arrange the worksheets within the workspace according to certain patterns. The three Tile commands display as much as possible of each open worksheet without overlapping worksheets.

3. Select the Tile Vertically command.

The program window now looks like this:

mWorksheetsMenu.png

Check mark indicates the worksheet in view

Use these commands to arrange the worksheets in the workspace.

25

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note. The portion of each worksheet that is visible varies depending upon a number of factors. These factors include the size of the application window, the screen font selected, the graphics driver selected, the number and proportions of the worksheets, and the tile command selected. There-fore, the image on your screen will probably differ from the above illustration.

Generally, the Tile Vertically command displays as many of the rows of each worksheet as possible. Conversely, the Tile Horizontally command displays as many of the columns of each worksheet as possible.

Now look at the Ordinary Income worksheet. Note that John and Mary’s combined wages are posted automatically to the “Wages” row of this worksheet. Note also that the Net Ordinary Income amounts on the Ordinary Income worksheet are posted directly to the “Ordinary Income” row of the Main Worksheet.

4. Press Esc to return to the Ordinary Income worksheet. Note that the Wages worksheet does not close when you press Esc.

5. Press Alt+W to open the Worksheets menu and you will see the open worksheets listed at the bottom of the menu.

For each worksheet listed at the bottom of the Worksheets menu and each worksheet open in the program workspace, there’s a tab labeled with the worksheet name under the menu bar and above the worksheet windows.

BNAIncomeTaxPlannerWindowTileVertically.png Total Wages on the Wages worksheet posted to the Ordinary Income worksheet

26

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


TITLE BARS

In the illustration above, note that the title bar’s color for the Ordinary Income worksheet is different from the color of the other worksheets and that this color matches the application’s title bar. This difference is how Windows identifies the active application and how the application identifies the worksheet with the focus. Notice also that the color of the tab labeled with this worksheet’s name matches this color, reinforcing which worksheet has the focus.

THE ESCAPE COMMANDS

Note also the middle section on the Worksheets menu. You can choose to have a worksheet close automatically when you press Esc to exit from the worksheet rather than remaining open. This command is particularly useful if you have many open worksheets but don’t need all of them visible at all times.

The second command in this section, Minimize On Escape, reduces the open and active worksheet to an icon at the bottom of the workspace.

6. Select Minimize On Escape.

The Worksheets menu closes. The next time you open it, you will see a check mark next to the Minimize On Escape command.

Note. To close a worksheet, click the Close icon or press Ctrl+F4.

INTEREST AND DIVIDENDS WORKSHEET

1. On row 2 “Interest and Dividends” of the Ordinary Income worksheet, press W (or double-click) to open the Interest and Dividends subworksheet.

Since John and Mary have three sources of additional interest income, we will create a custom worksheet to list and total the various income sources.

2. On row 4 “Other Interest”, press W. This message appears briefly:

Then the following custom worksheet opens:

msgNewCustomWorksheet.png

wiOtherInterestScenario1a.pngCustom worksheet title

Active cell

27

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that the column headings of the custom worksheet are the same as in the other worksheets. The left side of the worksheet is the row title section.

3. First we will type the row descriptions and then we will enter the data. Type the name of each bank, pressing Enter after the first two entries:

National Savings Bank, press Enter

American Bank, press Enter

Chase Savings and Loan

Note that each time you press Enter the program increases the number of rows in the worksheet by one and fills in the amount columns with zeros.

4. Now move the cursor to the first row in the numeric section by clicking the cell or by pressing the right and up arrow keys. In the 2015 column, enter the amounts for each bank followed by A to automatically post the amounts to the 2016 column. (Or open the Edit menu, then select the Auto Copy Within A Case command.)

3,000, press A

5,000, press A

4,000, press A

Using this Auto Copy command also takes you to the next row in the column. The amounts will be automatically totalled, and your custom worksheet will look like this:

5. Using one of five methods, return to the Interest and Dividends worksheet:

a. Click Interest and Dividends on the Worksheet List.

b. Click anywhere on the Interest and Dividends worksheet in the Worksheet pane.

c. Click the Interest and Dividends tab at the top of the Worksheet pane.

d. Select Interest and Dividends on the Worksheets menu.

e. Press Esc.

wiOtherInterestScenario1b.png

28

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


On the Interest and Dividends worksheet, note that there is an active worksheet icon next to row 4 “Other Interest” and that the total from the custom worksheet has been posted to this row.

6. In the first column (2015) of row 6 “Qualified Dividends”, enter 2,600 and press A. The top portion of the completed worksheet looks like this:

7. Press Esc to return to the Ordinary Income worksheet.

The Interest and Dividends worksheet is now minimized (because of the Escape command you selected from the Worksheets menu on page 27). But, since we selected this command after we escaped from the Wages worksheet, the Wages worksheet is not minimized.

Also, the worksheets are no longer tiled neatly since we added other worksheets. You could re-select the Tile Vertically (or Tile Horizontally, Tile Optimally, or Cascade) command from the Worksheets menu to bring order to the worksheets.

8. Click the Show/Hide Worksheet List button ( ) on the toolbar to make the Worksheet List visible again.

wiInterestAndDividendsScenario1b.png

BNAIncomeTaxPlannerWindowTileVerticallyScenario1c.png

Minimized worksheet

29

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


IRA DEDUCTIONS WORKSHEET

1. On the Worksheet List, double-click IRA Deductions to open the IRA Deductions worksheet. (You could also open this subworksheet by double-clicking row 14 “Taxpayer’s IRA” on the Ordinary Income worksheet.)

This worksheet computes the deductible portion of both taxpayers’ IRA contributions, taking into account their participation in an employer’s pension plan and applying the adjusted gross income limitations for the year specified. The worksheet also calculates modified AGI for purposes of the Roth IRA limit.

The program has automatically calculated row 16 “Roth IRA Modified AGI” based on entries made. Although this modified AGI amount still allows John and Mary the full Roth IRA limit, this limit will be reduced later as we add other income items.

John is not covered by an employer pension plan in 2015 or 2016. Mary, however, is covered by an employer pension plan in 2015.

2. In the first column (2015) of row 6 “Spouse Covered by Pension (Y/N)”, type Y and press Enter.

Press Enter again to accept No in the 2016 column.

3. In the first column (2015) of row 10 “T/P’s Traditional IRA Contribution”, enter 5,500 and press A to carry that amount to 2016.

All remaining items on the worksheet will have zeros. (Mary does not contribute to any kind of IRA in either year.) The program computes the allowable deductible IRA limit for each spouse ($5,500 for John in 2015 and $5,500 in 2016, when he is not covered by a pension plan). The completed worksheet looks like this:

wiIRADeductionsScenario1a.png

30

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


4. Press Ctrl+F4 to close the IRA Deductions subworksheet and return to the Ordinary Income worksheet.

Note the active worksheet icon next to rows 14 “Taxpayer’s IRA” and 15 “Spouse’s IRA”. You can access the IRA Deductions worksheet from either of these rows.

Note that the amounts for the following calculated rows were populated automatically:

row 12 “Total Ordinary Income”

row 26 “Total Adjustments”

wiIRADeductionsScenario1b.png

wiOrdinaryIncomeScenario1b.png

31

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


row 27 “Net Ordinary Income”

LEAVING WORKSHEETS: CLOSING, MINIMIZING, LEAVING OPEN

In the step above we closed the worksheet when we left it. When a previously-open worksheet is closed, it is still active and therefore if it has calculated rows, amounts can still be posted to it.

You can close a worksheet that you are currently on either by pressing Ctrl+F4 as above or by clicking the Close icon. Or on the Worksheets menu, you can access the Worksheet List submenu, then select Close Worksheet. Or in the Worksheet List, you can right-click the worksheet name, then select Close from the shortcut menu. You can also have the program close each worksheet when you escape from it by selecting Close On Escape (accessed from the Worksheets menu).

Alternatively, you can have a worksheet minimized when you leave it. Again, the worksheet is still open and active and amounts can be posted to it, but it is displayed as an icon in the workspace. The Interest and Dividends worksheet is currently minimized. You can minimize a worksheet by clicking on its Minimize icon. You can also have the program minimize each worksheet as you escape from it by selecting Minimize On Escape from the Worksheets menu (as we did earlier).

You can also leave a worksheet open when you switch to another worksheet. Just click on the destination worksheet window or its tab. Or, you can have the program leave all worksheets open when you escape from them by deselecting Close On Escape and Minimize On Escape from the Worksheets menu.

1. Press Esc to return to the Main Worksheet.

The calculation results have been automatically transferred to the appro-priate rows on this worksheet.

32

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that the active cell is the same cell from which you called the subworksheets (Ordinary Income).

Note also that rows 4 “Net Short-term Gain or Loss” and 5 “Net Long-term Gain or Loss”, now have the active worksheet icon next to them as a result of activating the Interest and Dividends worksheet. The Interest and Dividends worksheet contains items relating to capital gain dividends and is also accessible from the Capital Gains and Losses worksheet.

2. On the Main Worksheet, double-click row 4 “Net Short-term Gain or Loss” to open the Capital Gains and Losses worksheet.

Note that row 25 “Other Capital Gain Dividends” has an active worksheet icon as a result of activating the Interest and Dividends worksheet.

3. On row 3 “Security Transaction Analyzer”, press W to open the subworksheet.

SECURITY TRANSACTION ANALYZER WORKSHEET

The Security Transaction Analyzer worksheet generally follows the format of Form 1040, Schedule D. Columns are provided for entering:

a description of the property,

the case in which the transaction is included,

the owner of the security (for Taxpayer and Spouse analyses only),

the dates acquired and sold,

the sales price, and

wiMainWorksheetScenario1c.png

33

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


the cost or other basis.

If applicable, the program automatically computes the gain or loss and distrib-utes it among the following categories of gain or loss (as required under the Jobs and Growth Tax Relief Reconciliation Act of 2003):

Total Short Term

2003 Post 5/5 Short Term

Other Short Term

Total Long Term

2003 Post 5/5 Long Term

28% Rate Long Term

5-year Gain Purchased Before 2001

Other Long Term

The Security Transaction Analyzer worksheet also lets you override the holding period computation for a transaction by using the Security Informa-tion dialog.

As outlined in the facts for this example, the Joneses have six stocks that they wish to sell (including the ISO stock) and have planned the stock sales for 2015 and 2016, as shown below (the ISO stock is the fifth stock):

1. Enter this information for the stocks into the Security Transaction Analyzer, pressing Enter after each entry.

Note. You can edit data in the cells directly on the worksheet (press F2) or you can select View from the Analyzer’s Edit menu and edit the informa-tion through the Security Information dialog.

The program now computes the gain or loss for each stock and places the amount in the proper classification column. The classification is deter-mined by the stock’s holding period (e.g., the length of time between the stock’s acquisition date and sale date).

Descriptionof Property

Includein Case

AcquisitionDate

PlannedSale Date

PlannedSale Price

AcquisitionCost

Stock 1 Yes 06/30/2015 05/01/2016 $10,000 $5,000

Stock 2 Yes 11/30/2010 06/30/2015 $5,000 $2,500

Stock 3 Yes 01/02/2005 09/30/2016 $1,000 $3,000

Stock 4 Yes 04/30/2014 03/30/2015 $8,000 $6,000

Stock 5 Yes 02/15/2015 10/31/2016 $80,000 $40,000

Stock 6 Yes 02/01/2010 03/05/2015 $4,000 $3,000

34

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The completed worksheet looks like this:

This is how the program arrives at these results:

STOCK 1 The program calculates the sale of Stock 1 as a $5,000 short-term capital gain since the holding period was one year or less.

STOCK 2 Since Stock 2 has a holding period greater than one year but less than five years, the program calculates the $2,500 gain on the sale of the stock as long term capital gain.

STOCK 3 Since Stock 3 has a holding period greater than one year, the program calculates the $2,000 loss on the sale of stock as other long-term capital loss.

STOCK 4 The program calculates the sale of Stock 4 as a $2,000 short term capital gain since the holding period was one year or less.

STOCK 5 In February 2015, John exercised his option to buy 1,000 shares of Stock 5 (the ISO stock) at the exercise price of $40 per share. The fair market value of the stock at the time was $70 per share. He plans to sell the stock in October 2016 when he expects the stocks’s fair market value to have risen to $80 per share. The program calculates the $40,000 gain on the sale as other long-term capital gain. We will make the adjusting entries for the “spread” between the exercise price and the fair market value at the time of exercise later in this scenario.

STOCK 6 Since Stock 6 has a holding period greater than five years, the program calculates the $1,000 gain on the sale of stock as long-term capital gain.

2. Click Close to return to the Capital Gains & Losses worksheet.

wiSecurityTransactionAnalyzerScenario1b.png

35

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


3. Press Esc to return the focus to the Main Worksheet.

ITEMIZED DEDUCTIONS WORKSHEET

1. On the Main Worksheet, double-click (or press W) on row 7 “Itemized Deductions” to open the Itemized Deductions subworksheet, where we will enter John and Mary’s charitable contributions, home mortgage inter-est, and residential property taxes.

We will also use the State Estimated and Withholding subworksheet to specify how to determine the federal itemized deduction for state income taxes.

2. In both columns (2015 and 2016) of row 2 “Medical Expense”, enter $9,700.

The program automatically calculates the 7.5% or 10% limitation (row 3) and the net deductible medical amount (row 4).

3. In the first column (2015) of row 9 “Charitable Contributions”, enter the Jones’ cash contribution of $3,500 and press A. Note that a subworksheet is available to compute charitable contribution limitations in appropriate cases.

wiCapitalGainsAndLossesScenario1a.png

wiCapitalGainsAndLossesScenario1b.png

36

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note. Row 10 “State Income Taxes” has an inactive worksheet icon . The subworksheet for this row — State Estimated and Withholding — provides access to the Resident State Estimated & W/H Payments subworksheet, which allows you to specify how you want the program to determine the federal itemized deduction amount for resident state income taxes. You can also use the worksheet to calculate the payment amounts and, as part of the calculation, you can have the program use the current (or prior) year’s tax as entered on the Main Worksheet (or calculated there by the Fifty States program edition). The State Estimated and Withhold-ing worksheet is also accessible on row 22 “State Estimated & Withholding” of the Main Worksheet. We will wait until the other entries are complete and then access the State Estimated and Withholding worksheet from the Main Worksheet to calculate the federal itemized deduction.

4. In the first column (2015) of row 18 “Property Taxes: Residential”, enter $4,000 and press A.

5. Enter the Jones’ home mortgage interest as follows:

a. On row 21 “Qualified Residence Interest”, press W to open the Quali-fied Residence Interest subworksheet.

b. In the first column (2015) of row 3 “Qualified Housing Interest”, enter the Jones’ $15,000 home mortgage interest and press A to repeat the amount in the 2016 column.

c. Press Ctrl+F4 to close the subworksheet and return to the Itemized Deductions worksheet.

Note that the icon next to row 21 “Qualified Residence Interest” now indicates an active subworksheet.

The Joneses have no other itemized deductions. The amount of the total itemized deductions has been automatically calculated on row 43 “Total Itemized”.

37

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that the Joneses’ itemized deductions for years 2015 and 2016 are not reduced (see row 42).

6. After viewing the results, press Esc to return to the Main Worksheet.

ALTERNATIVE MINIMUM TAX WORKSHEET

The Alternative Minimum Tax subworksheet and its supporting worksheets were activated automatically when you started the application. The amounts that were automatically posted to the subworksheet (either from other subworksheets or from the Main Worksheet) are automatically transferred to row 10 “AMTI Net of Exemption” on the Main Worksheet.

John and Mary have additional preference items that have not been entered through other worksheets, so we will enter them on the Alternative Minimum Tax worksheet.

1. On row 10 “AMTI Net of Exemption” of the Main Worksheet, press W to open the Alternative Minimum Tax worksheet.

The worksheet contains some automatically posted amounts.

Note. If you are not using the Fifty States program edition, the calculated tax amounts may be different from those shown here because the program has automatically taken into account the state taxes.

2. In the first column (2015) of row 34 “Other Deferral Preferences”, enter the Jones’ $2,100 of preference items for accelerated depreciation and press A to repeat it in the 2016 column.

3. In the first column (2015) of row 36 “Other Deferral Adjustments”, enter 30,000 and press Enter. This entry represents the adjustment for the difference between the exercise price of the 1,000 incentive stock options

wiItemizedDeductionsScenario1b.png

wiItemizedDeductionsScenario1c.png

38

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


shares ($40,000) and the fair market value of the shares at the time of exercise ($70,000).

The lower portion of the Alternative Minimum Tax worksheet looks like this:

4. On row 26 “AMT Capital Gain or Loss”, press W (or double-click) to open the Capital Gain/Loss – Alt Min worksheet.

5. In the second column (2016) of row 20 “AMT Adjs to Other Long-term G/L”, enter the $30,000 spread as a negative adjustment and press Enter.

If the ISO generated a minimum tax credit, the credit will appear on the Minimum Tax Credit worksheet, which we will view later.

6. Return to the Main Worksheet without closing the Capital Gain/Loss – Alt Min worksheet.

wiAlternativeMinimumTaxScenario1b.png

wiCapitalGainLossAltMinScenario1a.png

wiCapitalGainLossAltMinScenario1b.png

39

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


We will skip row 11 “Minor Child Tax” because the Minor Child Tax worksheet is used for children under 18 years of age with unearned income and does not apply to the Jones’ case.

7. On row 13 “Alternative Capital Gains Tax”, press W to open the Alterna-tive Capital Gains Tax output worksheet, where we can view the results of using the Security Transaction Analyzer. The lower portion of the Alternative Capital Gains Tax worksheet looks like this:

On row 54, the program has computed an alternative capital gains tax of $18,503 for 2015 and $23,718 for 2016 as a result of the long-term capital gains in those years.

8. Close the Alternative Capital Gains Tax worksheet and return to the Main Worksheet.

We will skip rows 14, 15, and 16. (Row 16 “Tentative Minimum Tax” leads to the Alternative Minimum Tax worksheet, which we have already completed.)

9. On row 17 “Nonrefundable Credits”, press W to open the Credits subworksheet.

Note the $1,529 Minimum Tax Credit on row 25 for the year 2016 gener-ated by the ISO data we entered.

10. Double-click row 25 “Minimum Tax Credit” to open the Minimum Tax Credit worksheet, where we can see the details of the credit.

11. Press Esc to return to the Credits worksheet.

12. On row 5 “Child Tax Credit”, open the Child Tax Credit subworksheet.

CHILD TAX CREDIT WORKSHEET

The Taxpayer Relief Act of 1997 introduced the Child Tax Credit, which is provided for under IRC §24.

woAlternativeCapitalGainsTaxScenario1.png

Amount of Alternative Capital Gains Tax

40

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


1. In the first column (2015) of the first row, “Number of Qualifying Children”, enter 2 and press A to carry the amount to the 2016 column.

If the Joneses are eligible, the program will automatically calculate the amount of the credit on the last row of the worksheet.

In 2015, the Joneses qualify for $50 of the child tax credit. However, in 2016, because the Jones’ modified adjusted gross income exceeds the $110,000 threshold and phaseout for taxpayers filing joint returns, the Joneses are not eligible for the credit. Therefore, the program only calcu-lates the credit in 2015.

Note that row 5 “Personal Credits” shows the total of the dependent care credit and the child tax credit that they will receive ($1,250 in 2015 and $1200 in 2016).

2. Press Esc twice to return to the Main Worksheet.

wiChildTaxCreditScenario1.png

41

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


COMPLETING THE MAIN WORKSHEET

The Net Federal Tax is calculated and displayed on row 20: $18,782 for 2015 and $20,989 for 2016. These amounts do not yet take into account the deduction for state income taxes, which will be calculated below on row 22 “State Estimated & Withholding”.

If you have the Fifty States program edition, note that on row 21 the state tax has been calculated automatically. The Jones’ New York State tax liability is $7,902 for 2015 and $10,265 for 2016.

If you are not using the Fifty States program edition, enter these amounts directly on row 21 “State Tax” of the Main Worksheet.

STATE ESTIMATED AND WITHHOLDING WORKSHEET

The State Estimated and Withholding worksheet provides access to the Resident State Estimated & Withholding Payments subworksheet and, if you have the Fifty States program edition, to the New York Nonresident State Estimated & Withholding Payments and Other Nonresident State Estimated & Withholding Payments subworksheets.

The State Estimated and Withholding worksheet brings together the results of these three subworksheets for resident (and nonresident) state credits, the federal deduction, and the refund for overpayments.

1. On the Main Worksheet, double-click row 22 “State Estimated & Withhold-ing” to open the State Estimated and Withholding subworksheet.

wiMainWorksheetScenario1d.png

42

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


2. On row 2 “Resident State”, press W to open the Resident State Estimated & W/H Payments subworksheet.

RESIDENT STATE ESTIMATED & WITHHOLDING PAYMENTS WORKSHEET

The Resident State Estimated & W/H Payments worksheet calculates the state credit for taxes paid or withheld and allows you to specify how you wish the program to determine the amount of the federal itemized deduction for state income taxes.

You can have the program use the current (or prior) year’s tax as entered on the Main Worksheet (or calculated there by the Fifty States program edition), or you can have the program use the withholding amounts entered on this worksheet. We will use the Resident State Estimated & W/H Payments worksheet to calculate the federal itemized deduction for both years.

Since the Joneses do not want to apply a prior year’s refund to the current year’s state tax and they did not receive a 2014 state tax refund, we will skip the first eight rows.

1. On row 9 “Other Current Year Withholding”, press X to open the Summary Report (or select Summary Report on the Worksheets menu or Worksheet List, or click the Summary Report toolbar icon ).

2. Scroll down to the bottom of the report to see a tax summary of the Jones’ situation thus far.

The state tax is shown on row 52 “Resident State Tax”. We will estimate that John and Mary’s withholding will be slightly more than their tax liability.

woSummaryReportScenario1a.png

43

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


3. Return to the Resident State Estimated & W/H Payments worksheet and double-click row 8 “Withholding from Wages Worksheet” to open the Wages worksheet.

4. The total state tax for 2015 is 7,902, so we’ll estimate 8,000 as the payment on the Wages worksheet.

a. In the first column (2015) of row 23 “Taxpayer Resident State Withhold-ing”, enter 4,400 and press Enter.

b. In the first column (2015) of row 34 (Spouse Resident State Withholding), enter 3,600 and press Enter.

Note. We could have made these entries when we initially worked on the Wages worksheet on page 22.

5. Click the Resident State Estimated and W/H Payments worksheet tab to see that the program has immediately calculated a refund in the amount of $98 for 2016 in row 7 “Refund for Prior Year”.

6. Click the Summary Report tab to see the amount for 2016. The bottom portion of the Summary Report looks like this:

On row 52 “Resident State Tax”, note that the state tax is $10,265 for 2016.

7. We will enter $11,000 as a rounded estimate. Return to the Wages worksheet.

a. In the second column (2016) of row 23 “Taxpayer Resident State Withholding”, enter 6,100 and press Enter.

b. In the second column (2016) of row 34 “Spouse Resident State Withholding”, enter 4,900 and press Enter.

Note. If you are not using the Fifty States program edition, then the 2016 state tax will not change as it does in this example. This change, when using the Fifty States program edition, is a result of the interplay between the state and federal itemized deductions.

woSummaryReportScenario1b.png

44

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The bottom portion of the Wages worksheet should look like this:

8. Click the Resident State Estimated & W/H Payments worksheet tab. The worksheet should look like this:

The program has calculated the Total Federal Deduction in row 31. Note also that the Jones’ itemized deductions in prior years were well in excess of their standard deduction, so their state tax deduction produced a full tax benefit.

Since John and Mary are not subject to nonresident taxes, we can bypass the State Estimated and Withholding worksheet.

9. Return to the Main Worksheet.

wiWagesScenario1c.png

wiResidentStateEstimated&WHPaymentsScenario1a.png

wiResidentStateEstimated&WHPaymentsScenario1b.png

45

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The amounts for Itemized Deductions (row 7), Taxable Income (row 9), and Net Federal Tax (row 20) have changed to reflect the deduction.

The results show that John and Mary are liable for the tentative minimum tax in 2015 (after nonrefundable credits). In the year 2016 they are also liable for the tentative minimum tax because their usage of available credits is limited to the excess of the regular tax over the tentative minimum tax.

10. Return to the Minimum Tax Credit worksheet.

The Joneses have a Credit Generated (row 18) in the amount of $3,523 in 2015 which is carried to 2016.

wiMainWorksheetScenario1e.png

wiMinimumTaxCreditScenario1a.png

wiMinimumTaxCreditScenario1b.png

46

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


They also have an amount Total Carried to Future Years in row 48 of $3,523 in the 2015 column.

11. Press X to see the Summary Report showing the details behind the calculations (or simply click on the Summary Report if you left it open on the screen, or click the Summary Report icon on the toolbar).

Their Net Federal Tax Due in row 51 for 2015 and 2016 is $18,782 and $16,269, respectively.

If you are using the Fifty States program edition and the State Tax worksheet is activated for New York State, you will see in row 64 a Marginal Resident State Rate of 8 for 2015 and 6 for 2016.

12. Press Esc to return to the Main Worksheet with the option of changing any item on it.

Note. Remember that to make changes to rows with activated subwork-sheets you must call up the subworksheet.

SAVING CLIENT DATA

Now we will save the client file so that it is available for future review.

1. On the File menu, select the Save Client File As command (or click the Save icon on the toolbar). The Save Client File As dialog opens.

woSummaryReportScenario1c.png

woSummaryReportScenario1d.png

47

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note. The Save Client File command is a “quick save” feature — saving the file without prompts under the same name that you previously specified for the file. However, if you select the Save Client File command while a previously unsaved file is open, the program automatically treats your choice as Save Client File As.

2. In the File name field, type Scenario1 and press Enter.

<<desktop edition only>> The program automatically adds “.it” as the file extension. (In the Web program edition, plans are saved on Bloomberg BNA’s secure servers.)

When you press Enter, the program will save the file, close the dialog, and return you to the previous worksheet.

PRINTING THE RESULTS (A FORMATTED REPORT)

Now assume that you’d like a printed copy of the output for your files or to give to your client. The method described below formats the output or worksheet into a formal report and prints it out directly on your printer.

1. Make sure your printer is online.

Note. Before printing reports of your own, you may want to change printer settings or enter header and footer lines. See the help system for details.

2. Click the Print icon on the toolbar or select Print from the File menu.

A message appears informing you that program has new enhanced print styles. Click Style to close the message.

The Page Style dialog opens.

Preview window

Date & Time fields

dPageStyle.png

48

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

aly

zer,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er,

Pri

nt

&

Sav

e

Yea

rs w

/n C

ases

, S

ecu

rity

Tra

nsa

ctio

n

An

alyz

er, P

rin

t &

S

ave

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


This dialog allows you to customize the look of the printed worksheets. As you change the style options selected in the dialog, the Preview window changes to reflect your selections.

3. In the box under the Date and Time fields, click the Right radio button. Note that the Preview window shows that the Date and Time will now print under the Page number.

4. Click OK. The Print dialog opens.

Note. You can choose to send the reports directly to a printer or create a file, such as a text file, a spreadsheet file, or a PDF file, which you can load into your word-processing, spreadsheet, or Adobe Acrobat Viewer

program for further editing or review.

5. To print more than the active worksheet, click either the All Active Worksheets radio button or the Selected Worksheets radio button.

a. If you select All Active Worksheets, the active worksheets will be highlighted in the Worksheet List. You can click Save As Default to save all the active worksheets to the print initialization file. Even if you change the selected worksheets to be printed from the default, you can then click Restore Default to restore the worksheets you previously saved to the print initialization file.

b. If you select Selected Worksheets, you can click Select All Active to select all active worksheets for printing. Conversely, click Deselect All to deselect all previously selected worksheets. If you also select Select All Active or Deselect All, you can still select/deselect individ-ual worksheets on the Worksheet List by clicking the printer icon next to the worksheet(s) you want to print.

Note. If you click Preview before selecting any worksheets to be printed, the program automatically selects all active worksheets and displays them in the Print Preview window. You can change many aspects of the printed reports and review your changes while this window is open. Click Print to return to the Print dialog.

6. When all the items you want to print are selected, click Print to send the selected worksheets to the printer. Click Close to return to the Main Worksheet.

49

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


THIS PAGE IS INTENTIONALLY LEFT BLANK

50

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


SCENARIO 2

SALE OF STOCK, PRESENT VALUE & GRAPH

FACTS

Building on Scenario 1, this scenario illustrates the use of the Present Value worksheet and the Multiple Years within Cases feature to advise John and Mary on the timing of an additional stock sale.

The Joneses estimate that the proceeds from the stock they are planning to sell will be $30,000, representing a long-term capital gain of $25,000. John and Mary would like to know whether it is more advantageous to sell the stock this year or to wait until next year.


1. Using the same data file that you used in Scenario 1, click Close All Subworksheets on the Worksheets menu.

The Main Worksheet remains open.

2. Ensure that the Minimize On Escape command on the Worksheets menu is selected.

ASSUMPTIONS DIALOG

1. Open the Assumptions dialog and change the Number of Cases in Analysis from 1 to 2.

51

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Each case will cover two years (2015 and 2016). Case 1 will cover a stock sale in 2015 and Case 2 will cover a stock sale in 2016.

2. Enter the case titles.

a. Click Case Titles to open the Case Titles dialog.

b. In the Case 1 field, enter Stock Sale 2015 and press Enter.

c. In the Case 2 field, enter Stock Sale 2016 and press Enter.

Note. Rather than retyping most of this title, you can use copy and paste to replicate and then revise the first case title. First, click in the first (source) field to highlight the text. Then press Ctrl+C to copy the text to the clipboard.

Now, click in the second (destination) field to place the cursor and press Ctrl+V. The title in the second box will now match the title in the first box and the insertion point will be at the end of the title.

To change the year in the second field from 2015 to 2016, either use the mouse to highlight 2015 and type 2016 to overwrite it, or use Backspace to delete the 2015 and type 2016.

The dialog looks like this:

3. Click OK to close the dialog.

4. Click OK on the Assumptions dialog. The following message appears:

Note that the Yes button is surrounded by a bold black line which indicates that Yes is the default selection if you press Enter. You can also indicate your response by clicking on the appropriate button. Most message boxes work in a similar manner.

If you select Yes, your changes will be accepted as entered and the last case will be replicated into the new case.

dCaseTitlesScenario2.png

msgCautionNumberOfCasesScenario2.png

52

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


If you select No, your changes will be accepted but the last case will not be replicated into the new case. The focus will return to the previous worksheet.

If you select Cancel, the program returns the focus to the Assump-tions dialog so that you can modify your changes.

5. Click Yes to use the same basic information for both cases. You will enter specific information for each case later.

The Main Worksheet now shows data for two cases.

CAPITAL GAINS AND LOSSES WORKSHEET

1. On row 5 “Net Long-Term Gain or Loss” of the Main Worksheet, press W to open the Capital Gains and Losses worksheet.

2. In the first column (2015) of the first case (Stock Sale 2015), in row 29 “Other Long-term Investment Gain/Loss”, enter John and Mary’s $25,000 gain and press Enter three times.

In the same row, in the fourth column (2016) of the second case (Stock Sale 2016), enter 25,000 and press Enter.

Your entries should look like this:

3. Close the Capital Gains and Losses worksheet to return to the Main Worksheet.

wiMainWorksheetScenario2.png

wiCapitalGainsAndLossesScenario2a.png

53

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


4. This scenario is intended to take into account the increase in state tax caused by the stock sale. If you are not using the Fifty States program edition, enter the state tax amounts on row 21 “State Tax” of the Main Worksheet, shown above, now. Otherwise, skip this step.

PRESENT VALUE WORKSHEET

The Present Value Worksheet provides an immediate analysis of the net present value of taxes and cash flow, based on a discount rate of your choosing. This worksheet will help you demonstrate to John and Mary the best year in which to sell the stock, taking into account the time value of money. The tax computations from the Main Worksheet and its subworksheets will automatically flow into the Present Value worksheet.

Note. If you are not using the Fifty States program edition, the results may differ from the ones shown below. This is because the Fifty States program edition was used in this Tutorial and the state tax amounts have been calcu-lated automatically.

1. In the Worksheet List, right-click Present Value Worksheet and then click Open on the shortcut menu.

wiMainWorksheetScenario2b.png

WorksheetListShortcutMenu.png

54

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The Present Value worksheet displays the total federal and state tax amounts carried over from the program worksheets before a discount rate is applied.

2. Record the proceeds from the sale of John and Mary’s stock for each case. Case 1 will show the sale of the stock in 2015, and Case 2 will show the sale in 2016.

a. In the first column (2015) of the first case (Stock Sale 2015), in row 5 “Cash Flow Amounts”, enter 30,000 and press Enter three times.

b. In the last column (2016) of the second case (Stock Sale 2016), in row 5 “Cash Flow Amounts”, enter 30,000 and press Enter.

The program calculates the total of all taxes and all cash flows.

We need to enter a discount rate of 5% for the tax payments made and the cash flows received for each year.

3. In the first column (2015) of the first case (Stock Sale 2015), in the first row “Discount Rate (%)”, enter 5 and press Ctrl+A to automatically enter the 5% in all remaining columns of both cases.

The analysis has taken into account the time value of money.

wiPresentValueScenario2a.png

wiPresentValueScenario2b.png

55

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


In comparing row 10 “Total Net Present Value” for 2015 (the planning year) of the two cases, John and Mary can expect the sale of stock in 2015 to be marginally more advantageous (–32,747 vs. –32,989). The negative amount represents the proceeds less total taxes.

Note. This scenario does not take into account the income to be earned on the proceeds of the stock sale or the dividends on the stock.

The remainder of this scenario demonstrates the use of the Graph feature to view (and print) the results of an analysis.

USING THE GRAPH

Let’s take a look at a visual representation of the analysis.

1. Click Graph on the Menu bar. The Graph window opens.

The graph shown here was prepared using the Planner’s initial default settings for content (data), appearance (type) and titles. Since this is a 3-D (stacked) vertical bar graph, each column represents a single year in each case. Note that the case titles and years are displayed below each column.

The legend on the right displays the selected data items and their corre-sponding color. The order of the items on the legend matches the order in

wiPresentValueScenario2c.png

GraphScenario2a.png

56

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


which these items appear on the graph. So the largest block in each column, shown at the bottom, is for Disposable AGI, the last item on the graph.

This particular style of graph (3-D color) is best viewed on-screen or when printed in color. Let’s customize the appearance of this graph so that it is easier to read when printed.

2. Click Type on the Graph toolbar to open the Graph Type dialog.

3. Make the following changes on the Graph Type dialog:

a. Click the 2D Bar radio button.

b. Click the Horizontal radio button.

c. Click the Patterns check box.

d. Click OK to close the dialog. The graph now looks like this:

Note that the cases and years are now shown to the left of the case rows. (You will find that Patterns print better on black and white printers.)

We will now select some other data items to show on the graph.

dGraphType.png

GraphScenario2b.png

57

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


4. Click Data on the Graph toolbar.

The Graph Data dialog opens, allowing you to select other predefined data items or specify which worksheet rows you want included on the graph.

5. In the top section (Predefined Data Selections), click to de-select all the boxes that are checked.

6. In the bottom section (User Defined Data Selections), click to select the 1st and 2nd check boxes.

7. In bottom section, in the first field of the Worksheet column, click the drop-down arrow, scroll to and select Main Worksheet.

Instead of scrolling, you can press the initial letter of the worksheet or row name to move to the name and then click on the name to select it. If the name is not the first selection for a particular letter, keep pressing the initial letter until you reach the name you want to select. When you reach your selection, the selection displays in the selection text box. Click on this text box to make the selection.

8. Make the same entry in the second field of the same column.

9. In the 1st field of the Row column, select Taxable Income.

10. In the 2nd field of the Row column, select Schedule or Table Tax.

11. In the bottom section, click to select the 3rd and 4th check boxes.

12. In the 3rd and 4th fields of the Worksheet column, select Alternative Minimum Tax.

13. In the 3rd and 4th fields of the Row column, select Alt Min Taxable Income and Tentative Minimum Tax, respectively.

The Graph Data dialog now looks like this:

dGraphDataScenario2b.png

58

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

Sal

e o

f S

tock

, P

rese

nt

Val

ue

&

Gra

ph

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


14. Click OK to close the Graph Data dialog. The graph now looks like this:

Now let’s change the graph title.

15. Click Titles on the Graph toolbar to open the Graph Titles dialog.

16. Change the title from Income Distribution to Taxable and Tax. Click OK to return to the Graph.

dGraphDataScenario2c.png

GraphScenario2d.png

GraphScenario2e.png

59

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


17. Close the Graph.

PRINTING THE GRAPH

1. To print the graph, click the Print icon on the main toolbar. (The “enhanced print styles” message will appear unless it was previously suppressed. If it appears, click Style to close the message.

2. The Page Style dialog opens. Click Cancel to close it.

3. The Print dialog appears. Click the Selected Worksheets radio button.

4. If the Worksheet List is not visible, click Show Worksheet List. (If the Worksheet List is visible, the Hide Worksheet List button appears on the Print dialog.)

5. To print only the graph, click Deselect All.

6. On the Worksheet List, click on the printer icon to the left of Graph. The worksheet icon next to Graph becomes active.

7. To send the graph to the printer, click Print. For additional information on the graph, see the program’s help system.

CLEARING THE WORKSHEETS AND STARTING A NEW FILE

Once you have printed or stored the information you need, you should start a new client file (which clears out the previous client’s data) before entering the next client’s information.

1. Select New Client File on the File menu.

2. When the save message appears, click Yes.

60

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


SCENARIO 3

CASES W/N YEARS, INDIVIDUAL ACTIVITIES & CLIENT LETTER

This scenario examines the tax consequences of selling passive activities. It also illustrates how to enter information from 1099s and K–1s and how to create a letter to the client with the results of your analysis.

FACTS

George Winchester owns two passive activities and an interest in a mutual fund. He is thinking of selling one of the passive activities during 2015 and would like to know the tax consequences of selling one rather than the other. The net gain upon sale for each passive activity is expected to be $25,000.

INCOMEAND STATUS

George is single and has no dependents. His 2015 salary is $75,000. He earns $10,500 in other interest, $2,000 in dividends, and $5,000 in capital gain dividends annually on the XYZ Mutual Fund.

EXPENSES He pays $11,000 of qualified housing interest and $500 of other qualified residence interest. George anticipates that his state taxes will be $5,000. Other miscellaneous expenses total $2,300.

PASSIVERENTAL

ACTIVITY

George has a rental house passive activity, which he purchased prior to enactment of the Tax Reform Act of 1986. He actively participates in the management of the property, thus qualifying for the $25,000 exemption under IRC §469(i). George loses $24,000 per year on this passive activity.

PARTICIPA-TION IN A

PARTNERSHIP

His second passive activity is participation in a partnership, in which he is a limited partner owning less than a 10% interest. His interest in this activity has a loss of $5,000 per year and has a $500 positive adjustment for alternative

61

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


minimum tax purposes. The partnership has a $14,000 prior year unallowed loss for regular tax purposes and a $20,000 prior year unallowed loss for AMT purposes. The partnership is a pre-enactment activity. The partnership nonpas-sive items are $2,000 in annual other interest, a $10,000 long-term capital gain, and an $8,000 short-term capital loss.

Note. This scenario is not concerned with calculating the penalty for underpay-ment of estimated tax.


This scenario handles only the federal income tax calculation, not the calcula-tion of state income taxes. If you are using the Fifty States program edition, the state tax will be calculated automatically and included in the results. To make your results match the results in this scenario, first you must deactivate the State Tax worksheet.

DEACTIVATING THE STATE TAX WORKSHEET

Deactivate the State Tax worksheet by following these steps:

1. After starting a new client file, click row 21 “State Tax” of the Main Worksheet and press K. (Alternatively, you could select the Kill Subwork-sheet command on the Edit menu.)

A confirmation message appears informing you that this action will clear all data on the Resident State Tax subworksheets.

2. Click OK on the message to close it.

The State Tax worksheet is no longer active. (Note that the worksheet icon has changed to , indicating that the State Tax subworksheet is still available but inactive.)

ASSUMPTIONS DIALOG

1. Open the Assumptions dialog by clicking Assumptions on the Menu bar.

2. In the Client Name field, type George Winchester and press Enter.

3. In the Number of Cases in Analysis field, enter 3 and press Enter.

4. In the Number of Years in Analysis field, enter to 1 and press Enter. Note that the analysis type automatically changes from Years Within Cases toCases Within Years.

5. In the First Year of Analysis field, enter 2015.

62

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


6. Create individual headings for each of the three cases (columns).

a. Click Case Titles to open the Case Titles dialog.

b. Enter the titles as shown:

c. Click OK to close the Case Titles dialog.

7. Enter the client’s address for the client letter.

a. Click Client Address to open the Client Letter Address & Salutation Name dialog.

b. Enter the Client Address and the Salutation Name as shown. In the Salutation Name field, be sure to add a colon after Winchester.

c. Click OK to close the Client Letter Address & Salutation Name dialog.

The Assumptions dialog looks like this:

8. Click OK to close the Assumptions dialog and return to the Main Worksheet.

dCaseTitlesScenario3.png

dClientLetterAddress&SalutationName.png

dAssumptionsScenario3.png

63

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


MAIN WORKSHEET

1. In the first column (Keep Both) of row 1 “Filing Status”, enter George’s filing status as 1 (Single) and press A to make the same entry in all cases.

2. In the first column (Keep Both) of row 2 “Personal Exemptions”, type 1 and press A.

3. With the cursor on row 3 “Ordinary Income”, press W to open the Ordinary Income subworksheet.

ORDINARY INCOME WORKSHEET

1. In the first column (Keep Both) of row 1 “Wages”, enter George’s salary of 75,000 and press A.

We will enter George’s interest and dividends into the Individual Activi-ties subworksheets through the Passive & MAPRRA Income/Loss worksheet.

2. On row 5 “Passive Activity Income or Loss”, press W to open the subworksheet.

The Passive & MAPRRA Income/Loss worksheet serves as a summary of all passive activity income and loss items and provides access to the two levels of individual activity subworksheets, which handle passive and nonpassive input for K–1 and Form 1099 items on an activity-by-activity basis. For 1993 and subsequent years, the worksheet also accommodates Material Participation Rental Real Estate Activities (MAPRRAs) and

wiMainWorksheetScenario3a.png

64

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


provides access to a subworksheet that handles adjustments affecting the real estate exemption.

INDIVIDUAL ACTIVITY WORKSHEETS

The first level of the Individual Activity worksheets is a window where you can formulate a list of all activities and designate their characteristics. The second level comprises the individual activity worksheets (passive or nonpassive) attached to each activity on the list, where you can enter detail information about each activity’s items.

Note. You can access the individual activity worksheets directly through the Individual Activities rows located on many worksheets. For example, you could have accessed the activities worksheets from the Interest and Dividends worksheet by pressing W on any of the rows labeled Individual Activities. (The Interest and Dividends worksheet can be accessed by pressing W on the Interest and Dividends row on the Ordinary Income worksheet.) Alternatively, you can access any worksheet, including the individual activity worksheets, by double-clicking the worksheet’s name in the Worksheet List, which lists all worksheets.

1. On the first row “Individual Activities” of the Passive & MAPRRA Inc/Loss worksheet, press W to open the Individual Activities worksheet.

2. The Income and Loss Data dialog opens. Click OK to close it.

We will use the Individual Activities worksheets to list George’s activities and indicate whether they are passive or nonpassive, etc.

George’s first activity is the nonpassive XYZ Mutual Fund.

3. In the Description column of the first row, type XYZ Mutual Fund and press Enter.

The cursor moves to the next column (Passive or MAPRRA). By default, the program automatically enters No in this cell to indicate that the mutual fund is not a passive or MAPRRA activity. The program then automatically fills in the rest of the columns with N/A since these columns do not apply to nonpassive activities (except the < 10% Owner column which could apply but will default to No for nonpassive activities).

The inactive worksheet icon next to the row for this activity indicates that there is an Individual Activity subworksheet (Nonpassive Items) attached to this row for the XYZ Mutual Fund.

4. Press W to open this subworksheet (the cursor must be in a column other than the Description column).

George earns $10,500 of mutual fund interest annually.

65

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


5. In the first column (Keep Both) of row 9 “Other Interest” of the XYZ Mutual Fund subworksheet, enter 10,500 and press A.

George earns $2,000 each year in dividends.

6. In the first column (Keep Both) of row 10 “Qualified Dividends”, enter 2,000 and press A.

George earns $5,000 each year in capital gain dividends.

7. In the first column (Keep Both) of row 12 “Unrecap Sec 1250 Cap Gain Dividends”, enter 5,000 and press A.

The other items on this worksheet do not apply to this scenario. You can use the scroll bar or the arrow keys to scroll through the worksheet. The top portion of the worksheet looks like this:

8. Press Esc to return to the Individual Activities worksheet.

Note that there is now an active worksheet icon in the first column (Act. #) of the first row “XYZ Mutual Fund”. This indicates that a subwork-sheet has been activated for that row.

George’s second activity is his first passive activity, the rental property.

9. In the Description column of the second row, type Rental House and press Enter.

10. In the Passive or MAPRRA column of the second row, press Y and Enter to indicate that the house is a passive activity.

11. In the Active Real Estate column of the second row, press Y and Enter to indicate that the house is an active participation rental real estate property that qualifies for the $25,000 exemption under IRC §469(i).

12. In the Material Real Estate column of the second row, press Enter to accept the default of No, since George is not a real estate professional.

13. In the Trade or Business column of the second row, the program has automatically entered N/A because of the “No” entry in the previous column. Press Enter to accept the default of N/A.

wiXYZMutualFund.png

66

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


14. In the Pre-Enactment column of the second row, press Y and Enter to indicate that the house is pre-enactment property (i.e., held by the taxpayer on 10/22/86 and at all times thereafter).

15. In the < 10% Owner column, the program has automatically entered Y for Yes. Type N for No since this is only relevant to 1992 and 1993. Press Enter or the right arrow key to go to the next column.

16. In the PTP column, press Enter to accept the default of No since the property is not owned by a Publicly Traded Partnership (PTP).

The last column (PTP Id) will then default to N/A for non-PTP property.

The worksheet looks like this:

17. With the cursor on the Rental House row, press W to open the Rental House individual activity worksheet.

Use this worksheet to indicate the types of passive income and loss items for this activity. The item type determines how the program treats the item in the rest of the computations of regular and alternative minimum taxable income.

Note that the first row of the worksheet allows you to access the individual activity worksheet for nonpassive items. The rental property does not have any nonpassive items.

18. In the Sell #1 column of the Sold this year (Y/N) row, press Y. The other two columns in that row have No as the default.

wiIndividualActivitiesScenario3b.png

wiRentalHouseActiveRealEstateScenario3a.png

67

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The first item for the rental house is rental income.

19. In the first column (2015) of the Item 1: row, type Schedule E – Rental Income and press Enter.

The next cell, Type, is now active.

20. You can review item types by clicking on the drop-down arrow to open the list box. When you first open the list, you will see the following:

Accept the default of Other Ordinary so that the program treats the rental income as ordinary income.

21. The next cell, Disp G/L, is only relevant for computing the underpayment penalty. This cell does not apply to George because the activity is not owned through a partnership or S corporation in which George owns a less than 10% interest. Press Enter to accept the default value of No.

22. In the Keep Both column of the Current Year Income/Loss row, enter–24,000 and press A to enter a loss of $24,000 in all three columns, since the ordinary income/loss is not affected by the sale.

None of the other input rows apply to this rental activity.

23. In the first column (2015) of the Item 2: row, type Schedule D – Sale of House and press Enter.

24. In the Type cell, select Other LTG/L to specify other long-term capital gain/loss as the type, then press Enter.

25. In the Disp G/L row, press Enter to accept the default value of No.

26. In the Sell #1 column of the Current Year Income/Loss row, enter 25,000 as the net gain on the sale of the house, then press Enter.


wiRentalHouseActiveRealEstateScenario3b.png

TypeOtherOrdinary.png

68

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


27. Close this worksheet to return to the Individual Activities worksheet.

Let’s enter the information about the third activity, the partnership.

28. In the Description column for Activity 3, type ABC Partnership Income and press Enter.

29. In the next eight columns, make the following entries:

30. Press W on row 3 to open the Individual Activity worksheet for the ABC Partnership Income.

31. On the Nonpassive Items row, press W to open the Individual Activity (Nonpassive) worksheet for ABC Partnership and enter the following data in all three columns (press A after each entry):

wiRentalHouseActiveRealEstateScenario3c.png

Activity Information

Yes Activity is a passive activity

No Activity is not active real estate

No Activity is not material real estate

N/A Activity is not a MAPRRA trade or business

Yes Activity is a pre-enactment activity

Yes George has < 10% ownership

No Activity is not owned by a Publicly Traded Partnership

N/A Not Applicable

69

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The remaining rows on this worksheet do not apply to this scenario. The top portion of the worksheet looks like this:

32. Press Esc to return to the worksheet for passive items.

We will now enter the passive items for George’s second passive activity, the partnership.

33. In the third column (Sell #2) of the Sold this year (Y/N) row and press Y and Enter. (Accept the default of No in the other two columns.)

34. Enter the following information for Item 1:

Row Nonpassive Items

9 Other Interest 2,000 A

20 Other Short-term Investment Capital Gain/Loss –8,000 A

26 Other Long-term Investment Capital Gain/Loss 10,000 A

wiABCPartnershipIncomeScenario3a.png

Item Worksheet

Description Schedule E

Type Other Ordinary

Disp G/L No

Current Year Income/Loss –5,000 (all columns)

70

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


35. Enter the following data for Item 2:

Press Enter. The completed ABC Partnership Income Other Activity worksheet looks like this:

36. Return to the Passive & MAPRRA Inc/Loss worksheet (click that worksheet’s tab at the top of the Worksheet pane).


AMT Adjs to Income/Loss 500 (all columns)

Prior Year Unallowed Losses –14,000 (all columns)

AMT Prior Year Unallowed Losses –20,000 (all columns)

Item Worksheet

Description Schedule D – Sale of Partnership

Type Other LTG/L

Disp G/L Yes (click on the box to select)

Current Year Income/Loss 25,000 (Sell #2 column only)

wiABCPartnershipIncomeScenario3b.png

71

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that the last row defaults to No since it does not apply to 2015.

37. Close the Passive & MAPRRA Inc/Loss worksheet and return to the Ordinary Income worksheet.

wiPassive&MAPRRAIncomeLossScenario3b.png

72

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


Note that there is a $14,500 entry in all columns of row 2 “Interest and Dividends”, which was calculated from the interest and dividends entries you made through the individual activity worksheets (nonpassive items).

38. The program also has a summary feature for nonpassive activities.

a. On row 2 “Interest and Dividends”, press W to open the Interest and Dividends subworksheet.

b. On row 5 “Other Interest: Individual Activities”, open the Individual Activities summary worksheet for other interest items. (This is a summary worksheet, not a data entry worksheet.)

c. Press W on any row. (If the Income & Loss Data dialog opens, click OK to close it.)

You can access the same activity subworksheets you previously completed (through the Passive Activity Inc/Loss row).

39. Press Esc twice to return to the Interest and Dividends worksheet.

40. On row 7 “Qualified Dividends: Individual Activities”, press W to open the Individual Activities summary worksheet for dividends.

wiOrdinaryIncomeScenario3.png

woOtherInterestIndividualActivities.png

73

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


41. Return to the Ordinary Income worksheet.

Since George has no adjustments to be entered, the Ordinary Income worksheet is complete.

42. Press Esc to return to the Main Worksheet.

ITEMIZED DEDUCTIONS WORKSHEET

1. On the Main Worksheet, on row 7 “Itemized Deductions”, press W to open the Itemized Deductions worksheet.

2. Enter George’s mortgage interest as follows:

a. On row 21 “Qualified Residence Interest”, press W to open the Quali-fied Residence Interest subworksheet.

b. In the first column (Keep Both) of row 3 “Qualified Housing Interest”, enter 11,000 A.

c. In the first column (Keep Both) of row 4 “Other Qualified Residence Interest”, enter 500 A.

d. Close the subworksheet to return to the Itemized Deductions worksheet.

3. On row 32 “Other Miscellaneous Expense”, enter 2,300 in all three columns.


woQualifiedDividendsIndividualActivities.png

74

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


This completes the data entry for George’s situation.

4. To see the results, return to the Main Worksheet.

Row 23 shows the Total Net Tax Liability. From a purely tax standpoint, the best option would be for George to sell activity #2. The next best option would be to keep both activities. If he sells activity #2, the carryover losses associated with this activity offset some of the gain on the sale.

SAVING THE FILE

Now save the information.

1. Click the Save icon on the main program toolbar.

wiItemizedDeductionsScenario3a1.png

wiItemizedDeductionsScenario3a2.png

wiMainWorksheetScenario3b.png

75

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


The Save Client File As dialog opens with the File name field highlighted.

2. Type the file name (Scenario3.it), then click Save.

The rest of this scenario illustrates how to prepare a client letter.

CLIENT LETTER

Now that you’ve completed the analysis for George Winchester, you can create a letter to him giving him the results of your analysis.

1. Click Client Letter on the menu bar to open the client letter.

There are three toolbars: one for the main program, and two for the client letter.

MAIN TOOL BAR

The icons on the main program toolbar let you quickly perform certain activities on the entire client file (both worksheets and client letter). For example, you can use these icons to display a calculator or select a worksheet.

CLIENT LETTER TOOL BARS

The icons on the two client letter toolbars (shown below) let you quickly perform certain activities that are specific to the client letter (for example, change text to bold or paste linked data from a worksheet).

The main program toolbar and the client letter Standard toolbar contain similar functions but they actually perform different activities. For example, both toolbars contain Save icons but the Save icon on the main toolbar saves the entire client file (worksheets and client letter). If you click Save on the client letter toolbar, the program lets you save the client letter as a template but has no effect on the rest of the file.

Note. Be sure you are using the appropriate toolbar for the activity you wish to perform. For the remainder of this tutorial, unless otherwise stated, the icons you’re instructed to click are located on one of the client letter toolbars. Whenever the instructions include an icon, an image of the icon is shown.

ToolBar.png

ToolBarClientLetter.png Standard toolbar

Formatting toolbar

76

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


You can set up headers and footers to appear on the first page and/or subsequent pages of your letter. This is a good place to put your company name and address. For the most part, the client letter uses the same margins as the other printed pages of the analysis. However, you can specify a different top margin for the first page of the letter.

2. Before entering the header information, click the Margins icon to open the Margins dialog.

3. In each of the first four fields, enter 0.5.

4. In the Letter 1st Page Top field, enter 1.0. (This entry cannot be smaller than the entry in the Top field. If you use letterhead paper, you would enter a number large enough to allow for the letterhead.)

Click OK to close the dialog.

Note. The headers and footers for the letter are entirely separate from the headers and footers that you can add for the printed worksheets.

5. In this scenario, we will use the headers. Click the Show/Hide Headers & Footers icon. The headers and footers data entry boxes appear, with the cursor in the Header first page box.

6. Click the Center icon to center the address at the top of each page.

7. Let’s select a different font for the letterhead. With the cursor in the Header first page box, in the Formatting toolbar...

a. In the font style box, use the drop-down menu to select Times New Roman.

b. In the font size box, select 14 and press Enter.

c. Next to the font size box, click the Bold icon.

8. In the Header first page box, type:

Wilson & Associates

and press Enter.

9. In the font size box, change the entry from 14 to 11, press Enter, then click the Bold icon to return to a normal weight of text.

dMargins.png

77

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


10. Click in the Header first page box, then type each of the following lines, followed by Enter:

1234 Main Street

Anytown, VA 22202

11. Press Enter again after the last line. This will ensure you leave some blank space between the header and the body of the letter.

12. Click the Show/Hide ¶ icon to display paragraph symbols (¶) on-screen at blank lines and at the end of text lines. A paragraph symbol appears in the letter where you pressed Enter. This symbol will not appear on the printed letter.

The Header first page box looks like this:

Note. When you have paragraph symbols on (Show/Hide ¶ icon), you will not be able to use the Undo command. Therefore, we recommend that you show paragraph symbols only periodically to check your work but then hide them until they are needed again.

13. Click the Show/Hide ¶ icon again to hide these symbols.

14. Click the Show/Hide Headers & Footers icon again to close the headers and footers data entry box and return to the client letter page.

15. Click the Insert icon and click Date from the submenu.

When asked you if you want to update the date whenever the letter is printed, click No. (If you had selected Yes, each time you opened this file the program would put that day’s date in this field.)

16. Today’s date appears in your letter. Click the Align Right icon to align the date with the right margin of the page.

17. Press Enter three times to leave some blank space after the date.

18. We will now add the addressee’s (client’s) name and address to the letter. Click the Align Left icon.

19. Click the Insert icon and select Client Name on the submenu. The program inserts the client’s name from the Assumptions dialog.

20. Press Enter.

ClientLetterHeader.png

78

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


21. Click the Insert icon again and select Client Address on the submenu. The program inserts the address you entered for George at the beginning of this scenario on the Client Letter Address & Salutation Name dialog.

22. Press Enter twice.

23. To add the salutation to the letter, type:

Dear

and then press the Spacebar, click the Insert icon, and select Salutation Name on the submenu. The program inserts the salutation you entered on the Client Letter Address & Salutation Name dialog.

24. Press Enter twice. The client letter will now look like this:

Note. You cannot see the header you created in this view. We will switch to a view later in this tutorial that will show the header.

We will now create the body of the letter. (This letter is missing information that we will add later, so it will not read like a normal letter.)

Press Tab and then type:

We have completed the analysis you requested.

Press Enter twice, press Tab, and then type:

Our results indicate that, from a purely tax standpoint, you would be best off selling the partnership or keeping both the partnership and the rental house. If you sell the partnership, we estimate your net tax liability for 2015 to be $, as opposed to $ if you kept both the partner-ship and the rental house. Your prior year carryover losses of $ associated with the partnership will offset some of the gain on the sale.


On the other hand, if you sell the rental house, you will incur a considerably higher net tax liability of $ for 2015. As we discussed at our meeting, our analysis does not take into account the effect of state taxes on the result.

ClientLetterScenario3a.png

79

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::



Please feel free to call us if you have any further questions.

Press Enter twice, then type:

Sincerely,

Press Enter four times to leave room for a signature, then type:

A.J. Anderson

LINKING DATA FROM WORKSHEETS

You can include data from the worksheets in your letter. If you use a Paste Link, the information in the letter will be updated whenever you make changes to the analysis that affect the worksheet from which the information came. For any single pasted link you can paste as little as one cell or as much as an entire worksheet. We will paste single cells into several places in the letter.

1. From the Worksheets menu, select Main Worksheet.

2. Click the cell in row 23 “Total Net Tax Liability” of the Sell #2 column.

3. On the main program toolbar, click the Copy icon.

4. Return to the Client Letter (click anywhere on the letter).

5. In the second paragraph, shown below, click where indicated:

6. Click the Paste Link icon on the Client Letter toolbar (or click the Paste Link option on the Edit menu).

The program pastes the contents of the cell into the letter.

You cannot directly change the linked information within the client letter in any way. If you need to change the linked information, edit the appropriate source worksheets and the changes will appear in the client letter.

When you move your pointer over the linked text, it changes to a circle, representing a link in a chain. That indicates that the text was brought in from another source. If you double-click on the data, you will see a Client Letter Links dialog that contains information about the linked data.


8. Click the cell in row 23 “Total Net Tax Liability” of the Keep Both column.


Our results indicate that, from a purely tax standpoint, you would be best offselling the partnership or keeping both the partnership and the rental house. Ifyou sell the partnership, we estimate your net tax liability for 2015 to be $, asopposed to $ if you kept both the partnership and the rental house. Your prioryear carryover losses of $ associated with the partnership will offset some ofthe gain on the sale.

Use LetterText para tag.

Click here

80

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


10. Return to the Client Letter. In the second paragraph, click here:

Click the Paste Link icon on the Client Letter toolbar (or click Paste Link on the Edit menu).

11. Open the Passive & MAPRRA Income/Loss worksheet.

12. Double-click row 1 “Individual Activities” to open the Individual Activities worksheet. If the Income and Loss Data dialog opens, click OK to close it.

13. In row 3, double-click any column except the row title column to open the ABC Partnership Income Other Activity worksheet.

14. In the Item 1: Schedule E section, click the cell in the Prior Year Unallowed Losses row of the Sell #2 column.


16. Return to the Client Letter. In the second paragraph, click here:

Click the Paste Link icon on the Client Letter toolbar (or click Paste Link on the Edit menu).

The program issues a message letting you know that links to Individual Activities are not supported for letter templates, but we will continue. Click OK to close the message.


18. Click the cell in row 23 “Total Net Tax Liability” of the Sell #1 column.


20. Return to the Client Letter and in the third paragraph, click here:

Click the Paste Link icon on the Client Letter toolbar or select Paste Link from the Edit menu.

The Client Letter looks like this:

Click here

Our results indicate that, from a purely tax standpoint, you would be best offselling the partnership or keeping both the partnership and the rental house. Ifyou sell the partnership, we estimate your net tax liability for 2015 to be $7,608,as opposed to $ if you kept both the partnership and the rental house. Your prioryear carryover losses of $ associated with the partnership will offset some ofthe gain on the sale.

Update the numbers.

Click here

Our results indicate that, from a purely tax standpoint, you would be best offselling the partnership or keeping both the partnership and the rental house. Ifyou sell the partnership, we estimate your net tax liability for 2015 to be $7,608,as opposed to $9,013 if you kept both the partnership and the rental house.Your prior year carryover losses of $ associated with the partnership will offsetsome of the gain on the sale.

Update the numbers.

Click here

On the other hand, if you sell the rental house, you will incur a considerablyhigher net tax liability of $ for 2014. As we discussed at our meeting, our anal-ysis does not take into account the effect of state taxes on the result.

81

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


PRINT PREVIEW

1. You can use the Print Preview feature to see how your letter will look when printed. But first, you must select the correct item to be printed. To do this:

a. Click the Print icon on the main program tool bar.

b. If a messages appears informing you of the page styles, click to close it.

c. On the Page Style dialog, click to close it as well.

d. On the Print dialog, click Selected Worksheets.

e. Click Deselect All.

f. Click Close to close the dialog.

g. In the Worksheet List, click the printer icon next to Client Letter.

h. On the main program tool bar, click the Print Preview icon.

This is what the letter will look like when printed:

ClientLetterScenario3b.png

82

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Cli

ent

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

Cas

es w

/n Y

ears

, In

div

idu

al A

ctiv

itie

s &

Clie

nt

Let

ter

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


2. Click Close to leave the Print Preview window.

CHANGING THE FONT IN THE BODY

You can change the font of the entire letter (without changing the headers or footers):

1. Click Select All on the Edit menu.

2. On the Client Letter toolbar, click Times New Roman on the drop-down font list. Note how the appearance of your letter changes.

You can also change selected text to bold, italics, or underline by clicking on those icons in the client letter toolbar.

ClientLetterScenario3c.png

83

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::


SAVING THE LETTER AS A TEMPLATE

To use this letter for other clients, you could save it as a template.

1. First, on the File menu, click Save Client File. The program saves the client file, including the client letter.

2. Click the Save Letter Template As icon.

3. A dialog opens allowing you to save the letter as a template. In the File name field, enter a name for the letter template and then click Save to close the dialog.

Since the letter contains a link from an individual activity worksheet, you would need to create that link again when using the template with another client analysis.

EXITING THE PROGRAM

To exit the program, click the program’s Close icon , or select Exit from the File menu, or press Alt+F4. You will now return to Windows.

This is the end of the tutorial. You are now ready to use BNA Income Tax Planner to run cases of your own and experiment with some of the program’s additional features.

ClientLetterScenario3d.png

Click B to change selected text to bold, I to change selected text to italics, and U to changed selected text to underline.

84

BNA INCOME TAX™ PLANNER - Bloomberg BNA · PDF fileprograms and materials subsequently...

Documents

Transcript of BNA INCOME TAX™ PLANNER - Bloomberg BNA · PDF fileprograms and materials subsequently...