Gunnar B$.($age $42)$ and Hannah R$.($age $48)$ Ferguson are married and live at $5944$ Overhill Road, Council Bluffs, IA $51503($a suburb of Omaha$).$ Gunnar is a chemist employed by BAC Pharmaceuticals, Inc., and Hannah is a self$-$employed doctor of anesthesiology. They are calendar$-$year, cash$-$basis taxpayers.

BAC Pharmaceuticals develops and produces injectable medicines used in chemotherapy treatments for cancer patients. Gunnar$$s Form W$2$ from BAC reports taxable wages of $$91,180$ which is comprised of the following items. Gunnar manages the Omaha facility for an annual salary of $$95,000.$ BAC makes contributions to a qualified defined contribution pension plan for all its full$-$time employees which are not included in current compensation. Although Gunnar could make contributions into the plan, he chose not to do so in $2022.$ Gunnar participates in his employer$$s group health insurance plan to which he contributed $$4,000$ in $2022$ for medical coverage. These contributions are made with pre$-$tax dollars, so his taxable salary is reduced by $$4,000.$ The health plan covers Gunnar, Hannah, and their two dependent children. Because of the risk associated with Gunnar$$s work $($i$.$e$.,$ processing of chemotherapy drugs$),$ BAC provides all its employees with $$200,000$ of group term life insurance coverage. An additional $$180$ of income is included in Gunnar$$s Form W$2$ to report the taxable value of this insurance. Gunnar$$s Form W$2$ from BAC also reflects income tax withholding of $$6,500$ for Federal income taxes and $$4,000$ for state of Iowa income taxes.BAC generally reimburses Gunnar for expenses related to his work for the company. However, as a matter of policy, BAC does not reimburse for the following:

Monthly dinner meetings of the Midwestern Chemists Association $($MCA$)$ $$825$

Dues to professional organizations $240$

Subscriptions to professional journals $180$

MIA correspondence study course $230$

Gunnar attended $11$ MCA dinner meetings in $2022.$ The cost of each dinner included the following: $$40$ fee for speaker, $$25$ price of meal, and $$10$ parking fee. Gunnar goes to the meetings from work and returns home the same night. The Management Institute of America $($MIA$)$ charge was for an online home study course on ways to improve safety measures and avoid accidents in the industrial workplace.

Hannah Ferguson is a board$-$certified doctor of anesthesiology. She provides anesthesiology services at several hospitals and surgical centers in the greater Omaha area. Hannah is well$-$respected by the surgeons with whom she works. She uses her home as her business address. She keeps her records there, dictates notes to patient files, participates in conference calls regarding upcoming surgeries and postoperative surgical care, answers work$-$related phone calls, and compiles and sends patient bills. Because Hannah does not maintain a specific area for exclusive business use, she does not claim a tax deduction for a home office. Hannah$$s receipts from her practice during $2022$ were $$185,000,$ $$16,000$ of which was for services performed in $2021.$ Not included in these amounts is $$17,500$ she received in January $2023$ for services rendered in December $2022.$ Hannah$$s professional activity code is $621111.$

Hannah had the following business expenses in $2022$:

Medical clothing $($e$.$g$.,$ lab coats, surgical scrubs$)$ $$2,200$

Medical malpractice insurance $9,500$

State medical license fee $450$

Dues to professional organizations $350$

Subscriptions to professional journals $340$

In addition, she drove the family Suburban $($purchased on March $2,2021)2,900$ miles in connection with her work. She uses the standard mileage method for computing deductible vehicle costs. Total mileage for the Suburban is $9,000$ miles for the year. Both business and total mileage occurred ratably throughout the year.

Gunnar$$s widowed mother, Astrid, endured a few different medical challenges in late $2021.$ On December $30,2021,$ she suffered a massive stroke and died in the hospital on January $16,2022.$ Some of Astrid$$s medical expenses were covered by Medicare, with the remainder being paid by the Fergusons. On February $18,2022,$ Gunnar paid $$39,800$ to the hospital, $$28,000$ of which was attributable to expenses incurred in $2021.$ At the same time, Gunnar also paid the funeral expenses of $$16,000.$ Although Astrid lived in her own home prior to the stroke, Gunnar and Hannah have properly claimed her as a dependent for the past few years.

As Astrid$$s sole heir, Gunnar inherited her home and its furnishings $($located at $5422$ Turnbury Court, Carson, IA $51525).$ The costs and values involved are as follows:

Cost Basis FMV on $1/16/22$

Lot $$10,000$ $$30,000$

House $110,000250,000$

Furnishings $55,00025,000$

Because the home was located in an attractive rental area, Gunnar decided not to sell. Instead, he rented the property fully furnished on May $1,2022.$ The terms of the lease $($executed on April $30)$ provide for the following: one$-$year lease at $$2,500$ per month $($payable on the first of eac