Denise Lopez, age 40, is single and has no dependents. She is ProConnect Tax employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive, Boca Raton, FL 33434. Denise is a material participant in the business, she is cash basis taxpayer, and her Social Security number is 123-45-6781. Denise lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Denise wants to designate $3 to the Presidential Election Campaign Fund. She has never owned or used any virtual currency. Denise received the appropriate coronavirus recovery rebates (economic impact payments); related questions in should be ignored. During 2021, Denise had the following income and expense items:

a. $100,000 salary from Legal Services, Inc.

b. $20,000 gross receipts from her typing services business.

c. $700 interest income from Third National Bank. d. $1,000 Christmas bonus from Legal Services, Inc.

e. $60,000 life insurance proceeds on the death of her sister.

f. $5,000 check given to her by her wealthy aunt.

g. $100 won in a bingo game.

h. Expenses connected with Typing Services:

Office rent $7,000 Supplies 4,400 Utilities and telephone 4,680 Wages to part-time typists 5,000 Payroll taxes 500 Equipment rentals 3,000

i. $9,500 interest expense on a home mortgage (paid to Boca Raton Savings and Loan). j. $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2021. Denise had paid $14,000 for the silverware on July 1, 2011. She was reimbursed $10,000 by her insurance company. k. Denise had loaned $2,100 to a friend, Joan Jensen, on June 3, 2017. Joan declared bankruptcy on August 14, 2021, and was unable to repay the loan. Assume that the loan is a bona fide debt. 1. Legal Services, Inc., withheld Federal income tax of $15,000 and the appropriate amount of FICA tax from her wages. m. Alimony of $10,000 received from her former husband, Omar Guzman; divorce was finalized on December 2, 2013, and no changes have been made to the divorce decree since that time. n. Interest income of $800 on City of Boca Raton bonds. o. Denise made estimated Federal tax payments of $2,000. p. Sales taxes from the sales tax table of $953.

q. Property taxes on her residence of $3,200.

r. Charitable contribution of $2,500 to her alma mater, Citrus State College.

s. On November 1, 2021, Denise was involved in an automobile accident. At the time of the accident, her automobile's FMV was $45,000. After the accident, the automobile's FMV was $38,000. Denise acquired the car on May 2, 2020, at a cost of $52,000. Denise's car was covered by insurance, but because the policy had a $5,000 deduction clause, Denise decided not to file a claim for the damage.

Part 1-Tax Computation

Compute Denise Lopez's 2021 Federal income tax payable (or refund due), and complete her 2021 Federal tax return using appropriate forms and schedules. Suggested software: ProConnect Tax.

Part 2-Tax Planning

In 2022, Denise plans to continue her job with Legal Services, Inc. As a result, items a, d, and I will recur in 2022. Denise plans to continue her typing services business (refer to item b) and expects gross receipts of $34,000. She projects that all business expenses (refer to item h) will increase by 10%, except for office rent, which, under the terms of her lease, will remain the same as in 2021. Items e, f, g, j, k, and s will not recur in 2022. Items c, i, m, n, p, q, and r will be approximately the same as in 2021. Based on this information, Denise would like you to provide a tentative computation of her 2022 taxable income. Prepare a memo for her tax files that details this computation.