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$1.$

Ken $($birthdate July $1,1987)$ and Amy $($birthdate July $4,1989)$ Booth have brought you the following information regarding their income, expenses, and withholding for the year. They are unsure which of these items must be used to calculate taxable income.

Income:

Ken$$s salary $($salesman$)$

$$28,345$

Amy$$s wages $($part$-$time nurse$)$

$17,490$

Insurance reimbursement for repairs from an auto accident

$500$

Gift from Uncle George

$2,000$

Interest income from Lodge State Bank

$833$

Federal income taxes withheld:

From Ken$$s salary

$2,600$

From Amy$$s wages

$650$

Amy owns and operates a computer bookstore named $$The Disk Drive.$$ The store is located at $2000$ Broadway Street, Menomonie, WI $54751.$ The business EIN is $27-1234567$ and the principal business code for bookstores is $451211.$ During $2018,$ Amy had the following income and expenses:

Sales of books

$$320,985$

Expenses

Store rental

$15,985$

Office expense

$6,150$

Advertising

$11,700$

City business license

$1,020$

Payroll

$83,550$

Payroll taxes

$8,392$

Utilities

$8,050$

Other

$3,000$

Cost of inventory sold

$184,855$

Amy treats inventory as non$-$incidental materials and supplies.

This year, Amy loaned a friend $$10,000$ so that he could make an investment. Instead of making the investment, the friend lost all the money gambling and left for parts unknown. Amy has no hope of ever collecting on this bad debt.

Ken, who ordinarily never gambles, won $$20,000$ at a casino birthday party for one of his friends.

The Booths provide the sole support for Ken$$s parents, Rod $($Social Security number $124-80-9050)$ and Mary $($Social Security number $489-37-6676)$ Booth, who live in their own home. Ken and Amy live at $2345$ Wilson Avenue, Menomonie, WI$,54751,$ and their Social Security numbers are $343-75-3456($Ken$)$ and $123-45-7890($Amy$).$

Required: Complete the Booths$$ federal income tax return for $2018$ on Form $1040,$ Schedule $1,$ Schedule C$,$ Schedule D$,$ and Form $8949.$ A statement is required to be attached to a return for a nonbusiness bad debt, but this requirement may be ignored for this problem. Assume no $1099-$B is filed in association with the bad debt when filling out Form $8949.$