Comprehensive Problem 3-2A

Russell (birthdate February 2, 1970) and Linda (birthdate August 30, 1975) Long have brought you the following information regarding their income and expenses for the current year. Russell owns and operates a landscaping business called Lawns and Landscapes Unlimited (EIN: 32-1456789). The business is operated out of their home, located at 1234 Cherry Lane, Nampa, ID 83687. The principal business code is 561730. Russell's bookkeeper provided the following income statement from the landscaping business:

Lawns and Landscapes Income Statement 12/31/2021
	Current Period			Prior Period
	1/1/2021 to 12/31/2021			1/1/2020 to 12/31/2020
REVENUES
Lawn maintenance	$84,000			$71,998
Lawn and plant installation	34,600			48,576
Other	17,100			8,001
TOTAL REVENUES	135,700			128,575
COST OF SERVICES
Salaries	83,433			78,445
Payroll Taxes	6,700			6,432
Equipment Rental	12,600			10,651
Maintenance (Equipment)	8,300			8,435
Special Clothing and Safety Shoes	660			200
Contract Labor	7,780			6,790
TOTAL COST OF SERVICES	119,473			110,953
GROSS PROFIT (LOSS)	16,227			17,622
OPERATING EXPENSES
Advertising and Promotion	1,500			700
Donations	600			500
Insurance	4,000			870
Meals and Entertainment	2,300			2,100
Subscriptions	120			120
Business Gifts	790			600
Telephone	2,015			1,956
Training	1,975
Travel	865			750
Other	1,700			2,724
TOTAL OPERATING EXPENSES	15,865			10,320
NET INCOME (LOSS)	362			$7,302

The bookkeeper provided the following additional information:

Donations expense is a $600 donation to the Campaign to Re-Elect Senator Ami Dahla.

Training includes $575 for an educational seminar on bug control. It also includes the cost for Russell to attend an online certificate program in landscaping in order to improve his skills and advertise his designation as a certified landscaper. The tuition, fees, and books cost $1,400. He also drove his personal car 60 miles round trip to Boise to take exams three times for a total of 180 miles.

No business gift exceeded $22 in value.

The subscription is for a trade magazine titled Plants Unlimited.

Meals and entertainment is the cost of meals provided by restaurants.

The business uses the cash method of accounting and has no accounts receivable or inventory held for resale.

In addition to the above expenses, the Longs have set aside one room of their house as a home office. The room is 192 square feet and their house has a total of 1,600 square feet. They pay $13,200 per year rental on their house, and the utilities amount to $1,800 for the year.

The Longs inherited a large number of acres of farm land from Linda's father in 2020 and sold it immediately for its market value of $1,000,000. They invested the proceeds in the Potato Dividend High Yield Fund and received $44,600 in ordinary dividends, all of which were qualified, in 2021 (1099-DIV not shown).

The Longs have two dependent children, Bill (Social Security number 123-23-7654) and Martha (Social Security number 345-67-8654). Both Bill and Martha are full-time high school students, ages 18 and 19, respectively, and each can be claimed for the $500 other dependent credit. Both children received a scholarship for all tuition and fees but nothing in excess. Russell's Social Security number is 664-98-5678 and Linda's is 554-98-3946. They made an estimated tax payment to the IRS of $300 on December 31, 2021. The Longs received a $5,600 EIP in 2021.

Required: Complete the Long's tax return including Form 1040 and the provided schedules and forms. Assume the taxpayers had full-year health coverage and neither taxpayer wants to contribute to the presidential election campaign.

Do not complete Form 4562 (depreciation) or Form 8812 (additional child tax credit). You may ignore any related self-employment taxes. Make realistic assumptions about any missing data.

If required, enter a "loss" as a negative number on the tax form. Do not enter deductions or other amounts as negative numbers.

If an amount box does not require an entry or the answer is zero, enter "0".

Do not round any division. If required, round your final answers to the nearest dollar.v