Comprehensive Problem 3-2B

Christopher Crosphit (birthdate April 28, 1980, Social Security number 565-12-6789) and Traynor Crosphit (birthdate July 17, 1979) are married filing jointly in 2022. They have a dependent son, Arnold (Social Security number 276-23-3954). Arnold (birthdate July 1, 2004) is a high school student; he does not qualify for the child tax credit but does qualify for the $500 other dependent credit.

Chris owns and operates a health club called Catawba Fitness. The business is located at 4321 New Cut Road, Spartanburg, SC 29303. The principal business code is 812190 and the EIN is 12-3456789. Chris had the following income and expenses from the health club:

Income	$216,000
Expenses:
Business insurance	3,500
Office supplies	3,400
Payroll	99,000
Payroll taxes	9,000
Travel	2,500
Meals	2,100
Business gifts	800
Equipment maintenance	10,700
Cleaning service	8,800
Equipment rent	22,500
Utilities	14,000
Telephone	2,700
Rent	32,000
Advertising	4,000
Special workout clothing and boxing gloves	750
Subscription to Biceps Monthly magazine	100
Online educational seminar on gym safety	800
Other expenses	1,800

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

Travel includes a trip to a weight-lifting seminar in Miami, FL. The one-day seminar cost $400. Chris took Traynor and Arnold with him. Airfare was $400 for each of them. The seminar started early in the morning, so they flew down the night before and then left the following morning since the seminar ended late in the day. Traynor and Arnold went to Miami Beach for the day. Lodging was $250 per night for two nights and meals were $100 for each of the three of them ($300 total). They also paid $100 for ground transportation from the airport to the hotel hosting the seminar.

Meals includes $1,000 for a staff party for all employees of Catawba Fitness, $800 in restaurant meals, and $300 in non-restaurant meals.

Chris purchased business gifts for 20 customers at a cost of $40 each.

The Crosphits live next door to the health club at 4323 New Cut Road. Chris does all the administrative work for the health club out of an office in their home. The room is 171 square feet and the house has a total of 1,800 square feet. The Crosphits pay $20,000 per year in rent and $4,000 in utilities. Chris would prefer to use the simplified method to deduct his home office if possible.

Traynor works as a sales representative for an online manufacturer and distributor of exercise bicycles. Her W-2 follows (see separate tab).

Chris ran up credit card debt in 2022 and was able to negotiate a reduction of his balance. He received the following 1099-C (see separate tab).

Chris also dabbles as a broker of antique and rare books. He acquires and scavenges for books and then sells them on the Internet. He generated $4,000 of sales in 2022 and the books he sold cost $3,500. He also incurred $7,600 in travel and other expenses related to this activity. Chris has never turned a profit in the book business, but he loves books and book selling and does not mind losing money doing it.

The Crosphits withdrew $2,000 from the health care flexible account with Traynors employer to pay for Arnolds orthodontic work.

Chris made an estimated tax payment to the IRS of $500 on April 15, 2021.

Required: Complete the Crosphits federal tax return for 2022 on Form 1040, Schedule 1, and Schedule C. Do not complete Form 4562 (depreciation). Although the taxpayer is eligible for the Child or Other Dependent Tax Credit and Schedule 8812 is normally completed, we are giving you the amount to be entered directly on Form 1040. Assume the taxpayer had full-year health coverage and does not want to contribute to the presidential election campaign.