Mark R. and Suzanne N. Hauser (ages 45 and 46) are married and live at 14130 Laramie Lane, Gillette, WY 82717. Mark is a consulting engineer and Suzanne is a paralegal. They file a joint return and use the cash basis for tax purposes. 1. Trained as a mining engineer, Mark has developed considerable expertise in the treatment and disposition of waste material. He is also well versed in the Federal and state requirements for land reclamation projects. Mark operates a consulting business through which he advises clients on these matters. Mark's business activity code is 541990 . Most of his clients are small and medium mine owner/operators located in Wyoming and contiguous states (e.g., Montana, Idaho, Utah). In performing his services, Mark usually visits a client's job site. He submits his recommendations in a written report to the client, which is accompanied by a billing statement for his services and reimbursement for all out-of-pocket expenses for travel to the job site. Mark received the followinq amounts from his consulting business in 2021 : 2. Mark also provided services for three companies from his office, so there are no travel expenses. These fees are not included in the receipts listed in item 1 above. In late 2021, Mark learned that Garrett Mining is going through bankruptcy. As a result, Mark does not expect to collect any of this fee. 3. Other expenses paid by Mark in 2021 relating to his practice are listed below. 4. Mark operates his consulting business out of an office in his home that measures 24 feet by 25 feet. The total living space in the home is 3,000 square feet. Mark inherited the home on Laramie Lane from his father who died on June 6, 2014. At that time, the home had a fair market value of $400,000 ( $40,000 of which was allocated to the land). The Hausers moved into the home in autumn of 2014 , and Mark immediately set up his home office. The home's current fair market value is $500,000($50,000 allocated to the land). County land records reflect that Mark's father bought the land in 1975 for $6,000 and built the house in 1979 at a cost of $60,000. Mark depreciates the business use of his home using MACRS. Additional 2021 costs related to the home are as follows: The 2021 property taxes and mortgage interest on the home are listed in item 15. In addition to the repairs and maintenance noted above, Mark had the office repainted at a total cost of $1,200. Over the years, Mark has properly deducted the cost of all the furniture and equipment used in his office either as 179 expense or bonus depreciation in the year those assets were placed in service. On March 5, 2021, Mark purchased a heavy-duty, fire-resistant file cabinet with enhanced security features for $4,800. He made the acquisition to safeguard and maintain the privacy of client data. Consistent with past years, Mark prefers to avoid capitalizing and depreciating the cabinet if the law allows. 5. On February 4, 2020, Mark paid $41,000 (including sales tax) for an Infiniti crossover SUV (gross weight under 6,000 pounds). No trade-in was involved, and he did not claim any 179 expense or bonus depreciation on the cost last year. Under the actual operating cost method, he depreciates the SUV using MACRS. (Hint: See Table 2 in the Instructions to Form 4562.) His operating expenses for the Infiniti for 2021 are as follows: Mark drove the Infiniti a total of 14,500 miles during 2021,13,050 of which were driven for business purposes. During business use, Mark received three moving traffic violations for which he paid $680 in fines. He also incurred tolls and parking charges of $440. 6. Suzanne is a licensed paralegal who is employed on a part-time basis by several local attorneys. She works in their different offices between the hours of 9AM and 3PM, three days a week. She commuted to work using the family Suburban a total of 813 miles and paid parking fees of $310. Her 2021 earnings and job-related expenses are summarized below. Since Suzanne is a part-time employee, her employers do not cover her job-related expenses. The correspondence course is required continuing education so she can retain her license. Suzanne is thinking about applying to law school, which would require her to sit for the LSAT Exam. During 2021 , she spent $350 on an LSAT preparation course. Because Suzanne is a part-time employee, she is not covered by any of her employers' medical or retirement plans. During 2021, she contributed $6,000 to a traditional IRA that she established several years ago. The Hausers use the automatic mileage method to calculate any tax deductions they are entitled to for use of the Suburban. 7. With funds received from the settlement of his father's estate, Mark purchased rental property at 6204 Aspen Court in Gillette. Of the $250,000 purchase price, $30,000 was allocated to the land. After an $80,000 renovation to the house (e.g., replaced the roof, installed new flooring throughout the house, and installed a new furnace), the property was rented beginning February 1, 2015. In 2019, the Hausers decided their investment would be more marketable if the house was fully furnished. Consequently, they spent $38,000 on new furniture, drapes, and appliances. All the furnishings were placed in service on May 1, 2019. The Hausers did not claim 179 expense or bonus depreciation for the year in which those assets were placed in service. Under the current lease agreement, the property rents for $2,200 a month. Rent is due the first day of each month. Utilities are not included in the rent. Information regarding the property for 2021 appears below. The rent received includes $2,200 for January 2022 . The tenants prepaid the rent in mid-December because they went on vacation during the Christmas/New Year holidays. In addition to the property taxes listed above, Mark paid a special tax assessment of $1,300 to the City of Gillette for repaving the street in front of the property. The Hausers use MACRS to depreciate the rental home and the furnishings within it. 8. The Hausers acquired 1,000 shares of common stock in Garrett Mining on March 7, 2020, to hold for investment purposes. Mark first performed services for the company in late 2019, submitting a bill for $3,900. Because Garrett was experiencing cash flow problems at the time, Mark accepted the stock as payment for his services and recognized $3,900 of income upon receipt of the stock. Unfortunately, Garrett is currently in bankruptcy (see item 2). In late 2021, the bankruptcy judge announced that creditors will receive a fraction of what they are owed and shareholders recover nothing with respect to their equity investments in the company. The stock is not publicly traded. 9. On March 10, 2000, Mark's father gave the Hausers a plot of land located in Teton County as an anniversary gift. It had a value of $150,000 at the time of the gift, and no gift tax was required to be paid on the transfer. Mark's father had purchased the land on June 1, 1990, for $50,000. In December 2020, a real estate developer contacted the Hausers and made an offer to buy the property. After considerable negotiations, the Hausers agreed to transfer the Teton plot to the developer in exchange for $8,000 in cash and four city lots in Cheyenne, WY, worth $792,000. The Hausers considered the city lots to be a good investment because they are in a part of the city that is experiencing significant growth. The exchange occurred on March 4, 2021. The real estate developer paid for all closing costs and legal fees related to the exchange. 10. Mark inherited an antique gun collection from his father when he died. Although Mark has no idea what his father's cost basis was in these guns, the collection had a dateof-death value of $22,000. Concerned about the maintenance and security of the collection, Mark sold it to a dealer for $29,000 on July 10,2021. 11. On July 12, 2007, using $50,000 she received from an aunt's life insurance policy, Suzanne purchased a plot of grazing land in Converse County, WY, to hold for investment purposes. She leased it to local ranchers over the years. However, due to drought conditions, Suzanne has not rented the land since 2019. On August 2, 2020, she sold the land to a local rancher for $75,000. Under the terms of the sale, Suzanne received a down payment of $15,000 and 10 annual notes of $6,000 each. Suzanne will also receive simple interest of 8% on the outstanding principal bance each year. Suzanne negotiated the 8% interest rate since she is taking on the risk of this acquisition for the rancher. Suzanne collected $10,800 on August 2, 2021, from the rancher- $6,000 on the note and interest of $4,800. 12. The Hausers had several Schedule D transactions during 2020 that netted to a shortterm capital loss of $7,000. Of this loss, $3,000 was deducted in 2020, and $4,000 carried over to 2021. 13. Evelyn Olson, Suzanne's widowed mother, has lived with the Hausers for several years and has been claimed by them as a dependent. On December 30, 2020, Evelyn suffered a heart attack. After a few days in the ICU of a local hospital, Evelyn died on January 5, 2021. In early February 2021, the Hausers paid the following expenses related to Evelyn: Besides personal and household effects, Evelyn's major asset was a life insurance policy. As the sole beneficiary of the policy, Suzanne received $45,000 in death benefits on March 30,2021. 14. In addition to the items already noted, the Hausers had the following receipts during 2021: At their yard sale, the Hausers sold used furniture, books, toys, and other household goods having an estimated original cost of $1,800. In connection with her jury duty assignment in June, Suzanne drove the Suburban 40 miles and incurred expenses of $30 for parking and $45 for meals. 15. In addition to the items already noted, the Hausers had the following expenditures for 2021 : The Hausers drove the Suburban 420 miles to various medical and dental appointments. Wyoming has no state or local income tax but does impose a 4% general sales tax. The county in which the Hausers live imposes an additional local sales tax of 1%. Although they do not keep track of their sales taxes, the Hausers paid $1,600 of sales tax on the recreational vehicle they purchased in April 2021. 16. Besides Evelyn (see item 13), the Hausers' household includes two daughters, McKenna (age 19) and Kayleigh (age 16), and one son, Jared (age 14). McKenna graduated from high school in 2020. She earned $19,000 during 2021 , all of which she put into her college savings account. She heads off to college in fall 2022. Kayleigh and Jared are full-time students in high school and middle school, respectively. Kayleigh earned $1,800 from a summer job which she put into her college savings account. During 2021 , the Hausers received a $6,000 advance child tax credit payment which was reported to them in their Letter 6419 from the IRS. 17. For tax year 2020 , the Hausers had a Federal income tax overpayment of $150, which they applied to their 2021 income tax. Suzanne's income tax withholdings for the year are $5,100, and the Hausers made Federal quarterly tax payments totaling $12,000 ( $3,000 each installment). In addition, the Hausers received a $7,000 economic impact payment during 2021. 18. Relevant Social Security numbers are noted below. Requirements Prepare a 2021 Federal income tax return with appropriate supporting forms and schedules for the Hausers. In doing this, follow these guidelines: - Make necessary assumptions for information not given but needed to complete the return. - The Hausers are preparing their own return. - The Hausers have the necessary written substantiation (e.g., records, receipts) to support the transactions reported on their tax return. - If the Hausers have an overpayment of tax, they want it refunded to them. - The Hausers do not wish to contribute to the Presidential Election Campaign Fund. Mark R. and Suzanne N. Hauser (ages 45 and 46) are married and live at 14130 Laramie Lane, Gillette, WY 82717. Mark is a consulting engineer and Suzanne is a paralegal. They file a joint return and use the cash basis for tax purposes. 1. Trained as a mining engineer, Mark has developed considerable expertise in the treatment and disposition of waste material. He is also well versed in the Federal and state requirements for land reclamation projects. Mark operates a consulting business through which he advises clients on these matters. Mark's business activity code is 541990 . Most of his clients are small and medium mine owner/operators located in Wyoming and contiguous states (e.g., Montana, Idaho, Utah). In performing his services, Mark usually visits a client's job site. He submits his recommendations in a written report to the client, which is accompanied by a billing statement for his services and reimbursement for all out-of-pocket expenses for travel to the job site. Mark received the followinq amounts from his consulting business in 2021 : 2. Mark also provided services for three companies from his office, so there are no travel expenses. These fees are not included in the receipts listed in item 1 above. In late 2021, Mark learned that Garrett Mining is going through bankruptcy. As a result, Mark does not expect to collect any of this fee. 3. Other expenses paid by Mark in 2021 relating to his practice are listed below. 4. Mark operates his consulting business out of an office in his home that measures 24 feet by 25 feet. The total living space in the home is 3,000 square feet. Mark inherited the home on Laramie Lane from his father who died on June 6, 2014. At that time, the home had a fair market value of $400,000 ( $40,000 of which was allocated to the land). The Hausers moved into the home in autumn of 2014 , and Mark immediately set up his home office. The home's current fair market value is $500,000($50,000 allocated to the land). County land records reflect that Mark's father bought the land in 1975 for $6,000 and built the house in 1979 at a cost of $60,000. Mark depreciates the business use of his home using MACRS. Additional 2021 costs related to the home are as follows: The 2021 property taxes and mortgage interest on the home are listed in item 15. In addition to the repairs and maintenance noted above, Mark had the office repainted at a total cost of $1,200. Over the years, Mark has properly deducted the cost of all the furniture and equipment used in his office either as 179 expense or bonus depreciation in the year those assets were placed in service. On March 5, 2021, Mark purchased a heavy-duty, fire-resistant file cabinet with enhanced security features for $4,800. He made the acquisition to safeguard and maintain the privacy of client data. Consistent with past years, Mark prefers to avoid capitalizing and depreciating the cabinet if the law allows. 5. On February 4, 2020, Mark paid $41,000 (including sales tax) for an Infiniti crossover SUV (gross weight under 6,000 pounds). No trade-in was involved, and he did not claim any 179 expense or bonus depreciation on the cost last year. Under the actual operating cost method, he depreciates the SUV using MACRS. (Hint: See Table 2 in the Instructions to Form 4562.) His operating expenses for the Infiniti for 2021 are as follows: Mark drove the Infiniti a total of 14,500 miles during 2021,13,050 of which were driven for business purposes. During business use, Mark received three moving traffic violations for which he paid $680 in fines. He also incurred tolls and parking charges of $440. 6. Suzanne is a licensed paralegal who is employed on a part-time basis by several local attorneys. She works in their different offices between the hours of 9AM and 3PM, three days a week. She commuted to work using the family Suburban a total of 813 miles and paid parking fees of $310. Her 2021 earnings and job-related expenses are summarized below. Since Suzanne is a part-time employee, her employers do not cover her job-related expenses. The correspondence course is required continuing education so she can retain her license. Suzanne is thinking about applying to law school, which would require her to sit for the LSAT Exam. During 2021 , she spent $350 on an LSAT preparation course. Because Suzanne is a part-time employee, she is not covered by any of her employers' medical or retirement plans. During 2021, she contributed $6,000 to a traditional IRA that she established several years ago. The Hausers use the automatic mileage method to calculate any tax deductions they are entitled to for use of the Suburban. 7. With funds received from the settlement of his father's estate, Mark purchased rental property at 6204 Aspen Court in Gillette. Of the $250,000 purchase price, $30,000 was allocated to the land. After an $80,000 renovation to the house (e.g., replaced the roof, installed new flooring throughout the house, and installed a new furnace), the property was rented beginning February 1, 2015. In 2019, the Hausers decided their investment would be more marketable if the house was fully furnished. Consequently, they spent $38,000 on new furniture, drapes, and appliances. All the furnishings were placed in service on May 1, 2019. The Hausers did not claim 179 expense or bonus depreciation for the year in which those assets were placed in service. Under the current lease agreement, the property rents for $2,200 a month. Rent is due the first day of each month. Utilities are not included in the rent. Information regarding the property for 2021 appears below. The rent received includes $2,200 for January 2022 . The tenants prepaid the rent in mid-December because they went on vacation during the Christmas/New Year holidays. In addition to the property taxes listed above, Mark paid a special tax assessment of $1,300 to the City of Gillette for repaving the street in front of the property. The Hausers use MACRS to depreciate the rental home and the furnishings within it. 8. The Hausers acquired 1,000 shares of common stock in Garrett Mining on March 7, 2020, to hold for investment purposes. Mark first performed services for the company in late 2019, submitting a bill for $3,900. Because Garrett was experiencing cash flow problems at the time, Mark accepted the stock as payment for his services and recognized $3,900 of income upon receipt of the stock. Unfortunately, Garrett is currently in bankruptcy (see item 2). In late 2021, the bankruptcy judge announced that creditors will receive a fraction of what they are owed and shareholders recover nothing with respect to their equity investments in the company. The stock is not publicly traded. 9. On March 10, 2000, Mark's father gave the Hausers a plot of land located in Teton County as an anniversary gift. It had a value of $150,000 at the time of the gift, and no gift tax was required to be paid on the transfer. Mark's father had purchased the land on June 1, 1990, for $50,000. In December 2020, a real estate developer contacted the Hausers and made an offer to buy the property. After considerable negotiations, the Hausers agreed to transfer the Teton plot to the developer in exchange for $8,000 in cash and four city lots in Cheyenne, WY, worth $792,000. The Hausers considered the city lots to be a good investment because they are in a part of the city that is experiencing significant growth. The exchange occurred on March 4, 2021. The real estate developer paid for all closing costs and legal fees related to the exchange. 10. Mark inherited an antique gun collection from his father when he died. Although Mark has no idea what his father's cost basis was in these guns, the collection had a dateof-death value of $22,000. Concerned about the maintenance and security of the collection, Mark sold it to a dealer for $29,000 on July 10,2021. 11. On July 12, 2007, using $50,000 she received from an aunt's life insurance policy, Suzanne purchased a plot of grazing land in Converse County, WY, to hold for investment purposes. She leased it to local ranchers over the years. However, due to drought conditions, Suzanne has not rented the land since 2019. On August 2, 2020, she sold the land to a local rancher for $75,000. Under the terms of the sale, Suzanne received a down payment of $15,000 and 10 annual notes of $6,000 each. Suzanne will also receive simple interest of 8% on the outstanding principal bance each year. Suzanne negotiated the 8% interest rate since she is taking on the risk of this acquisition for the rancher. Suzanne collected $10,800 on August 2, 2021, from the rancher- $6,000 on the note and interest of $4,800. 12. The Hausers had several Schedule D transactions during 2020 that netted to a shortterm capital loss of $7,000. Of this loss, $3,000 was deducted in 2020, and $4,000 carried over to 2021. 13. Evelyn Olson, Suzanne's widowed mother, has lived with the Hausers for several years and has been claimed by them as a dependent. On December 30, 2020, Evelyn suffered a heart attack. After a few days in the ICU of a local hospital, Evelyn died on January 5, 2021. In early February 2021, the Hausers paid the following expenses related to Evelyn: Besides personal and household effects, Evelyn's major asset was a life insurance policy. As the sole beneficiary of the policy, Suzanne received $45,000 in death benefits on March 30,2021. 14. In addition to the items already noted, the Hausers had the following receipts during 2021: At their yard sale, the Hausers sold used furniture, books, toys, and other household goods having an estimated original cost of $1,800. In connection with her jury duty assignment in June, Suzanne drove the Suburban 40 miles and incurred expenses of $30 for parking and $45 for meals. 15. In addition to the items already noted, the Hausers had the following expenditures for 2021 : The Hausers drove the Suburban 420 miles to various medical and dental appointments. Wyoming has no state or local income tax but does impose a 4% general sales tax. The county in which the Hausers live imposes an additional local sales tax of 1%. Although they do not keep track of their sales taxes, the Hausers paid $1,600 of sales tax on the recreational vehicle they purchased in April 2021. 16. Besides Evelyn (see item 13), the Hausers' household includes two daughters, McKenna (age 19) and Kayleigh (age 16), and one son, Jared (age 14). McKenna graduated from high school in 2020. She earned $19,000 during 2021 , all of which she put into her college savings account. She heads off to college in fall 2022. Kayleigh and Jared are full-time students in high school and middle school, respectively. Kayleigh earned $1,800 from a summer job which she put into her college savings account. During 2021 , the Hausers received a $6,000 advance child tax credit payment which was reported to them in their Letter 6419 from the IRS. 17. For tax year 2020 , the Hausers had a Federal income tax overpayment of $150, which they applied to their 2021 income tax. Suzanne's income tax withholdings for the year are $5,100, and the Hausers made Federal quarterly tax payments totaling $12,000 ( $3,000 each installment). In addition, the Hausers received a $7,000 economic impact payment during 2021. 18. Relevant Social Security numbers are noted below. Requirements Prepare a 2021 Federal income tax return with appropriate supporting forms and schedules for the Hausers. In doing this, follow these guidelines: - Make necessary assumptions for information not given but needed to complete the return. - The Hausers are preparing their own return. - The Hausers have the necessary written substantiation (e.g., records, receipts) to support the transactions reported on their tax return. - If the Hausers have an overpayment of tax, they want it refunded to them. - The Hausers do not wish to contribute to the Presidential Election Campaign Fund