Client Facts:

Mr. Barker considers himself an entrepreneur. Unfortunately, he has yet to find lasting financial success. For example Sweet Feet, his novelty socks business, failed in late 2017. Undeterred, in January of 2018 Mr. Barker embarked on a new adventure selling cupcakes. To minimize his startup costs, Mr. Barker decided that he would initially bake the cupcakes in his home and sell them from a food truck. To start his business (Wheel Good Cupcakes) he spent $8,000 purchasing an old food truck to restore. He spent $3,000 on supplies/equipment to restore the truck. He also purchased $1,800 on baking supplies.

Mr. Barker quickly learned that there was little demand for a cupcake food truck in Central Illinois in January. On his opening day he made 150 cupcakes which he attempted to sell in several locations. The weather was cold and the wind was biting. Sadly, the customers were not biting and very few tried Barkers baked goods. He sold 26 cupcakes for $3.50 each and donated the rest to a local homeless shelter. He also decided that going forward he would only make cupcakes by special order for his acquaintances. During the year, his special order sales for friends and family members birthday parties, weddings, and other events produced $2,500 of income and $1,300 of expenses. He also sold the food truck for $12,000.

Mr. Barker decided to take time to reflect on his direction in life. He began working part-time as a fitness instructor with a fitness center named The Danger Room. While he enjoyed providing instruction, his entrepreneurial drive left him feeling restless. After working for a month with The Danger Room (and earning $2,500), Mr. Barker decided to work as a free-lance fitness and life coach.

Mr. Barker created a website and built a social media presence focused on personal fitness with an emphasis on aerobic dance. He paid a consultant $1,000 to build a business plan. He offered individual fitness coaching and group fitness sessions. Using his network of friends and acquaintances he began to establish a customer base. In 2018 Mr. Barker had revenue from individual and group sessions totaling $54,000. He used customer locations or public spaces like local parks to provide instruction. He used the 250 square foot spare bedroom in his apartment to work on updating his website and managing the business. He used his personal car to travel a total of 11,500 miles to and from sessions with his clients. He drove his car 2,900 miles for personal purposes during the year and 620 miles for volunteering (see below).

In addition to his work free-lance coaching, Mr. Barker also spent his free time volunteering with STEM Them! an organization focused on encouraging youth to obtain education and pursue science, technology, engineering and mathematics careers. Mr. Barker enjoyed helping and volunteered for 650 hours. He drove 620 miles commuting to and from STEM Them! Mr. Barker was glad to help and assumed that he would be able to take a sizeable charitable contribution deduction on his tax return for his volunteer hours. Mr. Barker also regularly purchased supplies for the childrens STEM learning projects. A review of his credit card statements shows Mr. Barker spent $2,800 at Science Stuff over the year. Mr. Barker lacks additional documentation for the donation of the supplies. Mr. Barker also donated 480 cupcakes valued at $3.50 each.

In the final quarter of 2018, Mr. Barker shifted all his fitness training work to evenings and weekends in order to take a position as floor supervisor for TeleMarket, Inc. where he earned $26,000. TeleMarket, Inc. did not offer an employee retirement plan, so Mr. Barker decided to begin saving for retirement for the first time in his career by opening an individual retirement account and contributing the maximum yearly contribution on December 28, 2018.

Required Questions to Address:

How are Mr. Barkers entrepreneurial activities treated for tax purposes?

What is Mr. Barkers AGI for the year 2018?

Based on the information provided, what are Mr. Barkers from AGI deductions?

Notes:

- Do not calculate taxable income. Mr. Barker likely has other deductions, which were not included in the facts provided below because they did not require additional research.

- In addition to required questions 1-3, you may also address any other issues you think are

important.