The Falkens: A Tax Case
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Journal of Business Case Studies – June 2008 Volume 4, Number 6
19
The Falkens: A Tax Case
Lynda S.
Livingston, University of Puget Sound
ABSTRACT
Personal finance students want to learn about taxes.
Personal finance texts, however,...
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Journal of Business Case Studies – June 2008 Volume 4, Number 6
19
The Falkens: A Tax Case
Lynda S.
Livingston, University of Puget Sound
ABSTRACT
Personal finance students want to learn about taxes.
Personal finance texts, however, often
concentrate on an overview of the tax system; since rules and forms change annually, textbook
authors concentrate their short problems on the fundamentals.
The Falken case allows students to
use actual forms and schedules to complete a comprehensive example.
Instructors can include
only those “modules” that meet their students’ needs, and they easily can update the exhibits as
laws change.
INTRODUCTION
t is difficult for personal finance textbooks to provide comprehensive tax examples.
Laws and forms
change annually, and students‟ needs vary.
Once a comprehensive example is published, it is already
obsolete; it is much easier, then, for textbook authors to concentrate on big-picture concepts, such as
distinguishing among exemptions, deductions, and credits.
However, students may want more.
They will be much more confident and competent if they have the
chance to complete a full tax return.
The Falken case requires students to prepare the tax return for a married couple
with six children.
It is much more comprehensive than the example problems presented in most current personal
finance textbooks: it not only covers more aspects of tax planning and preparation, but it also uses realistic tax forms
and reports.
The project as presented here requires completion of Form 1040; Schedules A, B, and D; Forms 2441,
8863, and 8812; and supporting worksheets.
However, the instructor can tailor the project to her desired level of
difficulty and to her students‟ interests by adding or deleting “modules” (e.
g.
, tax benefits for higher education,
investment income).
She can also add new details that address issues unique to the current tax year (e.
g.
, the
telephone tax credit that is illustrated in the 2006 version).
Thus, the Falken case is a template that is highly flexible
and easily modified.
This project is intended for students in personal finance courses at the sophomore level and above.
Most of
the situations facing the Falkens are those that students are likely to encounter during their early years out of college.
Students in personal finance courses suggested many other details of the project, reflecting their immediate concerns
(e.
g.
, gifts of tuition from grandparents, identification of “dependent” children).
In the following sections, we
present the project, as it would be given to students.
THE PROJECT
You will be preparing the tax return for Persephone and Stephen Falken, a married couple.
Below is a full
list of the members of Persephone and Stephen‟s household, followed by information on various tax-related aspects
of their lives.
Name Family Member Date Of Birth SSN
Persephone wife/mother 12/5/63 765-33-1093
Stephen husband/father 6/9/54 453-02-2864
Joshua son 12/5/80 525-75-9684
Lawrence son 10/10/86 525-12-3925
Chamberlain son 10/10/86 525-00-1129
Xena daughter 2/3/95 525-13-3245
Artemis daughter 9/26/98 525-86-8564
Demeter daughter 7/8/06 525-86-9006
I
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