Complete the 2020 federal income tax return for Eddy and Sarah Howard. You may assume the Howards have substantiated all expenses that qualify for tax deductions and tax credits In preparing their tax return, you may use Form 1040, Schedules (e.g., 1, 2, 3, A, B, C, D and/or E), Form 2441, 4562, 8582, 8863, 8949, 8995 and other forms if necessary.

Family Information:

Husband	Eddy Howard	SSN 434-32-7829	Birthday: 8/21/1960
Wife	Sarah Howard	SSN 683-79-2052	Birthday: 4/15/1966
Home address	216 Stanford Ave, Oakland, CA 94608
Son	John Howard	SSN 614-42-5871	Birthday: 2/08/1999
Daughter	Elaine Howard	SSN 658-98-7480	Birthday: 6/13/2009

Facts:

1. Sarah Howard earned gross wages of $100,000 from Microsoft Corp. Her 2020 Form W-2 shows that $15,000 has been withheld from her paycheck for payment of federal income taxes.

2. Eddy Howard also received Social Security benefits of $10,000 in 2020.

3. Eddy Howard owns a used bookstore in Oakland called Books Etc.. It is a sole proprietorship located at 432 Hollis Ave, Oakland, CA, 94608. Its income and associated expenses for the year ending December 31, 2020, are the following:

Gross Income	$ 495,000
Less: Cost of Goods Sold	(312,000)
Gross Profit	183,000
Automobile Expense	(5,200)
Depreciation Expense	?
Office Expense	(48,000)
Supplies Expense	(1,800)
Meals Expense	(2,000)
Entertainment Expense	(2,400)
Utilities Expense	(3,600)
Salaries and Wages	(80,000)
FICA tax Expense	(6,120)
Total Expense	(?)
Net Income/(Loss)	$ ?

On January 1, 2020, Books Etc. purchased and place in service a new delivery van for $64,000. The vans weight does not exceed 6,000 pounds. Furthermore, it purchased bookcases (7-year property) for $20,000, and computers (5-year property) for $7,000 on March 1, 2020. Assume Books Etc. does not have any depreciable assets other than the new assets placed in service for 2020. It elected to use MACRS. Story Books elected out of bonus depreciation and elected not to claim section 179.

4. Interest income consists of the following:

Citibank	$ 700	US Bank	$ 340
Wells Fargo	500	City of Oakland	$ 120

5. Dividend income consists of the following:

Pfizer	$ 3,200	(Qualified amount	$ 3,200)
Factset	$ 7,900	(Qualified amount	$4,000)

6. Sarah Howard is previously divorced (in 2010) from Stephen Smith (SSN 453-87-5402), and she had one child with him. In 2020, she made alimony payments totaling $13,000 to him along with child support payments of $7,000. She does not claim this child as a dependent.

7. The Howards own a house at 905 21st Street, Concord, CA, 94520. They purchased this house on January 1, 2014, for $500,000. 80% of the purchase price was related to the house, and the remaining 20% was related to the land Starting from January 1, 2014, they have converted it to a rental property and rented it to Jacob Floyd. In 2020, its rental report showed the following:

Rental Income	$ 36,000
Interest expense (mortgage)	(15,000)
Repair expense	(700)
Property tax expense	(3,000)
Utilities Expense	(100)
Depreciation Expense	(?)
Total Expense	(?)
Net Income/(Loss)	$ ?

8. The Howards also had invested in several flow-through entities (they have not actively participated in the activities). In 2020, the results from these flow-through entities were as follows:

Socal Brewers (Limited Partnership)

$ 18,000

Rolling Sushi (S-corp)

($ 19,800)

9. In 2016, Eddy Howard purchased an annuity from MyLife for $90,000. Monthly payments of $1,000 on the annuity started on January 15, 2020 and will continue for a total of 15 years.

10. On October 1, 2012, the Howards bought a house as their primary personal residence for $350,000. It is located at 4232 Bushard Ave, Chico, CA, 95928. They had lived in this house as primary residence until they moved to Oakland. They sold it on February 1, 2020 for $600,000 and incurred a commission fee of $50,000.

11. Eddy Howard made the following stock sales:

Shares/Stock name	Purchase Date	Sale Date	Sales Price	Purchase Price
150 shares of GM	2/15/2020	6/12/2020	$4,000	7,000
300 shares of Google	5/12/2015	9/25/2020	$19,000	12,000
100 shares of Starbucks	8/30/2012	10/13/2020	$3,000	6,000
500 shares of Microsoft	7/11/2020	11/30/2020	$5,000	4,000

12. In 2020, Sarah Howard made an IRA contribution of $5,500

13. Unreimbursed qualifying medical expenses for the family in 2020 were as follows:

Doctor visits	$ 3,000	X-lays	$ 1,050
Prescription medication	920	Glasses/Contact lenses	800
Dentist visits	700

14. Taxes paid in 2020 (in addition to other taxes discussed previously) were as follows:

State income taxes	$ 6,800	Real property taxes	$ 3,700
Automobile license fees (based on its year)	900

15. Mortgage interest paid in 2020 (in addition to other mortgage interests discussed previously) was $18,360 on their personal residence. Assume the outstanding principal on this mortgage is 500,000.

16. Cash charitable contributions made in 2020 were as follows:

UNICEF

$ 6,100

Red Cross

$ 1,400

17. The Howards incurred child care expenses for their daughter, Elaine, of $14,000 in 2020 in order for them to work. These expenses were paid to Christine Young (SSN: 482-93-0923), who lives at 5614 Lester Ave, Oakland, CA, 94605.

18. John Howard is a full-time college student as a fourth-year student. He was studying at New York University in the United States, He earned no income while he was studying. The Howards paid his tuition of $8,000 for 2020. The Howards claim a tax credit for this qualified education expense.

19. The Howards made an estimated tax payment of 2,000 (in total) for the year. This amount reflects all four quarters estimated tax payment for their sole proprietorship.

20. The Howards claim both John and Elaine as their qualified child.