Alicia and Willie Smith are married and live in Honolulu. Alicia is 46, and Willie is 44 years old. Willie is self-employed as an auto mechanic and Alicia is employed at a hospital. The couple fully support their two children who live with them, Ian and Sarah, ages 8 and 12 respectively.

Alicia earned $84,000 in wages this year. She also won $1,000 for her innovative solution to a long-standing problem at the hospital. Willie was married previously and got divorced 14 years ago. In 2020, he paid his ex-wife $500 alimony each month and $1,000 child support each month. He has not seen his son from his previous marriage in 3 years. Alicias father, Oliver, is disabled and lives in a nursing home. Alicia paid 60% of all Olivers living costs in 2020. Olivers only income during the year was $2,800 of qualified dividends.

Alicias great auntie died during the year and Alicia inherited $25,000. Alicia contributed $5,500 of the inheritance to a traditional IRA and Willie contributed $4,000 to a self-employed pension (SEP) account. Alicia is not covered by a qualified retirement plan at her job.

Willies 2020 auto mechanic revenues were $60,000. He paid $18,000 of general business expenses, including rent for a repair shop in town. He also paid $600 of meal costs incurred taking insurance agents to lunch to discuss potential client referrals for accident repair services he could provide. In addition, Willie placed in service the following business assets during the year.

Asset	Class	Placed in Service Date	Original Cost
Air Compressor	7 year	1/28/20	$2,000
Computer Monitor	5 year	2/8/20	$1,000

The Smiths paid the following during the year:

• Doctor bills for medical services of $9,000
• Nursing home fees for Oliver of $14,000
• Home mortgage interest of $16,500
• Real property taxes of $7,500
• State income taxes of $2,800 withheld from Alicias paychecks
• Federal income taxes of $6,950 withheld from Alicias paychecks
• Yard maintenance costs of $125 per month
• Cash donation to Green America (qualified charity) of $750
• Cash donations to the Light of God Church (qualified charity) of $950

Alicia and Willie are cash basis taxpayers and file a joint return. They elect NOT to take additional first-year bonus depreciation, and elect to take section 179 depreciation.

Question 16 of 35

2 Points

Where on the MFJ tax return would payments the Smiths made for their yard maintenance be reported?

• A.

  As an itemized deduction

• B.

  Not reported on MFJ return

• C.

  In gross income

• D.

  On Schedule C

• E.

  As a deduction for AGI

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Question 17 of 35

2 Points

Where on the MFJ tax return would cash donations the Smiths made to qualified charities be reported?

• A.

  In gross income

• B.

  Not reported on MFJ return

• C.

  As an itemized deduction

• D.

  On Schedule C

• E.

  As a deduction for AGI

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Question 18 of 35

2 Points

What is the amount reported on the MFJ tax return for Schedule C profit?

• A.

  39,000

• B.

  38,400

• C.

  41,157

• D.

  38,700

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Question 19 of 35

2 Points

What is the total amount reported on the MFJ tax return for Gross Income?

• A.

  126,500

• B.

  145,000

• C.

  123,700

• D.

  148,700

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Question 20 of 35

2 Points

What is the total amount reported on the MFJ tax return for Deductions for AGI?

• A.

  15,500

• B.

  18,234

• C.

  20,968

• D.

  12,734

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