John and Susie are your newest tax clients. They are married and have 1 child. They own a home in Dallas, TX, where they live. They have come to see you for some tax planning for 2019.

As U.S. citizens they must report their income. They each earn about $400,000 each year from jobs BUT they also have high expenses related to their work. They net about $150,000 each annually.

They are not employees; they are independent contractors.

Their businesses have been run as sole proprietorships. In the past, they have each separately filled Schedule Cs as part of their income tax return in order to report their income.

They have no employees.

They have a stock portfolio of $300,000, which generates $9,000 of qualified dividends annually and a bond portfolio of $100,000, which generates $3,000 of taxable interest annually.

Their bond portfolio consists of corporate bonds paying 3% interest.

Their corporate portfolio is as follows:

Stock	Purchase Date	Basis	Fair Market Value
XYZ	01/01/2014	10,000	74,900
ABC	01/01/2015	30,000	100,000
DEF	01/01/2016	80,000	125,000
GHI	01/01/2017	100,000	100
			300,000

They own a rental home, a single-family dwelling. It generates net income after expenses of $12,000 annually. They purchased it for $150,000. They have taken $50,000 of depreciation on it. They would like to sell it because they are tired of worrying about renters. They think they can sell it for $220,000.

Michelle their daughter has interest income of $5,000 annually from a trust fund set up per her grandfather Eds will.

Personal Residence

They own their personal residence. They bought it for $250,000 2 years ago and it is now worth $350,000. They would like to sell it, and buy a slightly larger home.

$50,000 paid for child care

Mortgage interest: $7,000

Property taxes: $8,000

Medical expenses: $12,000, not including medical insurance.

Medical insurance: They have a high deductible plan. The insurance premiums are $6,000 annually.

Charitable deductions: $10,000 annually

They have no savings in a retirement plan. There is no retirement plan set up through their businesses.

They would like to write-off the GHI. They believe it is worthless. Can they take a $100,000 write-off? Why or why not? If not, what are the options for getting it out of their portfolio, and what would be the tax treatment?