Calvin and his wife Susie live in Watterson, California which is a moderate sized town between

Sacramento and Chico. They have been pretty successful in their financial lives over the years

and own a number of business ventures. They have two sons, Tomas and John. Tomas $($SS

$333-44-9668)$ was born in December $1999$ and John $($SSN $444-33-9988)$ was born a few years

later in June $2005.$ Tomas attends school at Sac State carrying only $9$ units each semester in the

graduate accounting program so that he can work part time in one of his dad$$s businesses to earn

money to help pay for school. John is in high school and also works part time for his dad during

the summer.

Calvin and Susie are the sole owners of Watterson$$s only car wash. Since Watterson is in the

central valley, people$$s cars and trucks get very dirty all the time, so Calvin is never short on

business. He is in charge of all of the big decisions, but has left the day$-$to$-$day running of the

business to Tomas and to the general manager, an unrelated person named Rosy. Calvin has

owned this business since he moved to Watterson in $1984.$ He distrusts lawyers, though he loves

his accountant who gets him a refund on his federal tax return every year, so he has never taken

the lawyer$$s advice to incorporate the car wash business. Calvin figures he is just washing cars,

what$$s the worst that could happen? In any case, Attachment $1($all attachments are at the end of

this narrative$)$ shows the debits and credits $($Rosy does all this work and then provides it to the

accountant$)$ related to the car wash business, Cal$$s Cheery Car Cleaners $($FEIN: $34-6885588).$

The information does NOT include Calvin$$s decision to buy new equipment during $2021$ AND

$2022$ to upgrade the speed of the car washing and expand to more car washing bays. Calvin likes

to keep things simple, so does not believe in using the accrual method of accounting or anything

to do with GAAP. As Calvin always says $$GAAP is crap$.$ Attachment $2$ shows all of Calvin$$s

fixed assets along with their date placed in service. Attachment $3$ shows the assets Calvin

disposed of during $2022$ in order to replace them with the new assets purchased in $2021($which

are part of the fixed assets table$).$ Calvin decided to borrow money from his local bank to help

finance the cost of the new assets. He has never borrowed before for the car wash business. The

contract to purchase all of the new bay #$4($there is no Bay #$2)$ related equipment was signed on

October $1,2021$ and the new assets placed in service in December $2021.$ Calvin also purchased

a few more assets in $2022$ as shown on Attachment #$2.$ The car wash business was profitable in

$2021$ but not in $2014,2016$ or $2018($so much for even years$).$

Back in $1996,$ Calvin purchased an old house for the family to call home. However, the real

estate market was not so good in Watterson and Calvin saw an opportunity. Instead of moving

into the house as their primary residence, Calvin and Susie decided to rent the house and buy a

larger house for themselves. The rental is in Watterson at $12122$nd Avenue, while their main

home $($where they still live in $2022)$ is at $6663$ Main Street in Watterson. Calvin has been lucky

with the $2$nd Avenue rental as he has only had two tenants in the entire $20+$ year period and no

one has ever been late with the rent. Calvin does all of the bill paying and rent collecting for this

unit but uses a handyman to do any repairs and maintenance.

During January $2021,$ Calvin saw another opportunity in real estate in his town and decided to

purchase an additional rental, but this time it was a $4$ unit apartment complex at $888815$th Street

$($kind of outside of town, but still close enough to visit if necessary and to collect the rent$).$

Calvin decided that with $4$ tenants, he would use a property management company to take care of

screening tenants, collecting the rent and making repairs. Calvin, however, gets final say on the

amount of rent and whether he believes the prospective tenants are worthy of renting in his new

apartment building. Calvin takes care of paying all of the bills and just gets a rent check from

the property managers every other month.

In $2022,$ Susie convinced Calvin that it would be a good idea to buy some property in the

mountains. So after quite a bit of looking and discussion, Calvin and Susie settled on a

condominium in Squaw Valley, CA at a price of $$350,000.$ So they could make the monthly

payments, and since they could not be there every day, they decided to use a rental company to

make arrangements to have the condo rented on days when they were not going to be there.

After the purchase of the condo, Calvin and Susie hired a contractor to do some re$-$modeling.

Susie really wanted to have a much larger kitchen area and had the contractor remove one of the

walls separating the kitchen and the living room. During the demolition, the contractor, who

happens to be Susie$$s brother, Darryl, found a painting hidden inside the wall. Being an honest

fellow, Darryl,