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Diana and Ryan Workman were married on lanuary 1 of last year. Diana bas an cightyear-old son, Jorge, from her previous marriage. Ryan works as

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Diana and Ryan Workman were married on lanuary 1 of last year. Diana bas an cightyear-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Inc, (DI) earning a salary of 596,000 . Diana is self-employed and runs a day care center. The Workman's reported the following financial information pertaining to their activities during the current year. a. Ryan carned a $96,000 salary for the year. b. Ryan borrowed $12,000 from DI to purchase a car. DI charged him 2 percent interest (\$240) on the loan, which Ryan paid en December 31, but would have charged Ryan $720 if interest was calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. c. Diana received $2,000 in alimony and $4,500 in child support payments from her former husband. They divorecd in 2016. d. Diana won a $900 cash prize at ber church-spoasered Bingo game. e. The Workman's received $500 of intercat from corporate bonds and $250 of interest from a manicipal bond. Diana owned these bonds before she married Ryan. f. The couple bought 50 shares of ABC lnc. stock for $40 per share on July 2 . The stock was worth $47 a share on December 31. The stock paid a dividend of $1.00 per share on December 1 . g. Diana's farher died on April 14. She inherited cash of 550,000 from her father and his baseball card collection, valued at $2,000. As beneficiary of her father's life insurance policy, Diana also received $150,000. h. The couple spent a weckend in Arlantic City in November and came bome with gross gambling winnings of $1,200. i. Ryan received $400 cash for reaching 10 ycars of continuous service at DI. j. Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received 56,000 from his disability insurance. DI paid the premiums for Ryan, but they reported the amount of the premiums as compensation to Ryan on hes year-end W-2, k. The drunk driver who hit Ryan in part (i) was required to pay his $2,000 medical costs, 51,500 for the emotional trauma be suffered from the accident and 55,000 for punitive damages. 1. For mecting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,000 year-end bonius. DI (located in h. The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $1,200. i. Ryan received $400 cash for reaching 10 years of continuous service at DL. j. Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He reccived $6,000 from his disability insurance. DI paid the premiums for Ryan, but they reported the amount of the premiums as compensation to Ryan on his year-end W-2. k. The drunk driver who hit Ryan in part (j) was required to pay his $2,000 medical costs, 51,500 for the ennotional trauma he suffered from the accident and $5,000 for punitive damages. 1. For mecting his performance goals this year, Ryan was informed on December 27 that he would reeeive a 55,000 year-end bonus. DI (located in Houston. Texas) mailed Ryan's bonus check from its payroll processing eenter (Tampa, Florida) on December 28. Ryan didn't receive the check at his home until Jantaary 2 . m. Diana is a 10 pereent owner of MNO Inc., a Subchapter S corporation. The company reported ordinary business income for the year of $92,000. Diana acquired the MNO slock two years ago. n. Diana's daycare business collected $35,000 in revenues. In addition, customers owed her $3,000 at year-end. During the year, Diana spent $5,500 for supplies, \$1, 500 for utilities, \$1 5,000 for rent, and $500 for miscellaneous expenses. One customer gave her use of his vacation home for a weck (worth $2,500) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting. a. Ryan's employer pays the couple's annual health insurance premiums of 55,300 for a qualified plan. Required: A. Assuming the Workman's file a joint tax return, deternine their gross income minus expenses on the daycare business (this is called total income on the Form 1040). B. Using your answer in part A, complete page 1 of Form 1040 through line 7b for the Workman's. C. Assuming the Workman's live in Califomia, a community property state, and that Diana and Ryan file separately, what is Ryan's gross income minus expenses on the daycare business? D. Using your answer in part C, complete page I of Form 1040 through line 22 for Ryan Workman

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