Elisa and Clyde operate a retail sports memorabilia shop. For the current year, sales revenue is $55,000 and expenses are as follows:

Cost of goods sold	$21,000
Advertising	1,000
Utilities	2,000
Rent	4,500
Insurance	1,500
Wages to Boyd	8,000

Elisa and Clyde pay $8,000 in wages to Boyd, a part-time employee. Because this amount is $1,000 below the minimum wage, Boyd threatens to file a complaint with the appropriate Federal agency. Although Elisa and Clyde pay no attention to Boyds threat, Chelsie (Elisas mother) gives Boyd a check for $1,000 for the disputed wages. The retail shop is the only source of income for Elisa and Clyde.

1. Calculate Elisa and Clydes AGI.

2. Can Chelsie deduct the $1,000 payment on her tax return? Explain.

3. How could the tax position of the parties be improved