Heather and Nikolay Laubert are married and file a joint income tax return. Their address is 3847 Jackdaw Path, Madison, WI 58493. Nikolay’s Social Security number is 000-00-1111, and Heather’s is 000-00-2222. Nikolay is a mechanical engineer, and Heather is a highly renowned speech therapist. She is self-employed. They report all their income and expenses on the cash method. For 2016, they report the following items of income and expense:

Gross receipts from Heather’s business ………………………………………$110,000

Rent on Heather’s office ………………………………………………………..........…12,000

Receivables written off during the year (received in Heather’s business)……….1,300

Subscriptions to linguistic journals for Heather ………………………………....…250

Salary for Heather’s secretary-receptionist ……………………………………...22,000

Nikolay’s salary ………………………………………………………………….................78,000

Qualified medical expenses ……………………………………………………..........12,000

Property taxes on their personal residence ……………………………………...4,200

State income tax refund received this year (the tax benefit was

received in the prior year from the state income tax deduction) ………...400

State income taxes withheld on Nikolay’s salary ……………………………….4,600

Federal income taxes withheld on Nikolay’s salary ………………………….12,000

Heather’s estimated tax payments …………………………………………….......20,000

Interest paid on residence ……………………………………………………….........11,000

Income tax preparation fee for the prior year’s return paid this

year ($500 is allocated to preparation of Schedule C) …………………………$940

Heather and Nikolay sold the following assets:

Heather owned the KLN stock and sold it to her brother, Jacob. Heather and Nikolay used the motorcycle for personal recreation.

In addition to the items above, they donate Miner Corporation stock to their community church. The FMV of the stock on the date it is donated (8/18/16) is $6,200. It cost $2,700 when purchased on 3/12/98. Heather and Nikolay’s home is burglarized during the year. The burglar stole an entertainment system (FMV $3,500; cost $5,000), an antique diamond ring and pendant (FMV $12,000; cost $10,000), and a painting (FMV $1,500; cost $1,300). The insurance company pays $1,500 for the entertainment system, $4,000 for the jewelry, and $500 for the painting. Complete Heather and Nikolay’s Form 1040, Schedules A, C, D, and SE, Form 4684, and Form 8283. For purposes of this problem, disregard the alternative minimum tax and any credits.