Michael Black, age 45, is single. He lives at 2537 Base Lane, Tuscon, AZ 85701. His Social  Security number is 111-11-1112. Michael wants $3 to go to the Presidential Election Campaign Fund.

Michael's wife, Jill, passed away in June 2016. Michael's son, Todd, who is age 16, resides with Michael. Todd's Social Security number is 123-45-6788.

Michael owns a sole proprietorship for which he uses the accrual method of accounting and maintains no inventory. His revenues and expenses for 2018 are as follows:

Sales revenue $650,000

Cost of goods sold (based on purchases for the year) 325,000

Salary expense 80,000

Rent expense 25,000

Utilities 10,000

Telephone 5,500

Advertising 3,000

Bad debts 4,000

Depreciation * 19,000

Health insurance ** 25,000

Accounting and legal fees 6,000

Supplies 1,000

* New office equipment ($19,000); Michael chose to use the immediate expensing 179 election

** $17,000 for employees and $8,000 for Michael

Other income received by Michael includes the following:

Dividend income (qualified dividends):

Swamp, Inc. $6,000

Wrap, Inc. 2,000

Interest income:

First Bank 9,000

Second Bank 1,500

City of Tuscon, AZ bonds 15,000

During the year, Michael and his sole proprietorship had the following property transactions:

1. Sold Blue, Inc. stock for $40,000 on March 12, 2018. He had purchased the stock on September 5, 2015, for $55,000.

2. Received an inheritance of $200,000 from his uncle, Jerry. Michael used $125,000 to purchase Green, Inc. stock on May 15, 2018, and invested $75,000 in Gold, Inc. stock on May 30, 2018.

3. Received Orange, Inc. stock worth $10,000 as a gift from his aunt, Jane, on June 17, 2018. Her adjusted basis for the stock was $5,000. No gift taxes were paid on the transfer. Jane  had purchased the stock on April 1, 2012. Michael sold the stock on July 1, 2018, for $25,000.

4. On July 15, 2018, Michael sold one-half of the Green, Inc. stock for $40,000.

5. Michael was notified on August 1, 2018, that Yellow, Inc. stock he purchased from a colleague on September 1, 2017, for $47,500 had become worthless. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy.

6. On August 15, 2018, Michael received a parcel of land in Phoenix worth $210,000 in exchange for a parcel of land he owned in Tucson. Because the Tucson parcel was worth $235,000, he also received $25,000 cash. Michael's adjusted basis for the Tucson parcel was $210,000. He originally purchased it on September 18, 2015.

7. On December 1, 2018, Michael sold the condominium in which he had been living for the past 20 years (1844 Bighouse Lane, Tuscon, AZ 85701) and moved into a rented townhouse. The sales price was $480,000, selling expenses were $28,500, and repair expenses related to the sale were $9,400. Michael purchased the condominium for $175,000.

Michael's potential itemized deductions, exclusive of the aforementioned information, are as follows:

Medical expenses (before the 7.5% floor) $ 9,000

Property taxes on residence 6,000

State income taxes 3,000

Charitable contributions 8,000

Mortgage interest on residence 9,500

Sales taxes paid 4,500

During the year, Michael makes estimated Federal income tax payments of $35,000 (payments of $8,750 were made on April 15, 2018, June 15, 2018, September 15, 2018 and December 15, 2018).

THIS RETURN IS FOR 2018 - TAX LAWS IN EFFECT FOR 2018 WILL APPLY (THEREFORE, IT DOES REFLECT THE NEW TCJA of 2017)

Compute Michael's lowest net tax payable or refund due for 2018 assuming that he makes any available elections that will reduce the tax. The tax forms required for your computations are Forms 1040, 4562, 8949, and 8824 and Schedules A, B, C, D, and SE.