Note: This problem is for the 2020 tax year.

Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon did not engage in any virtual currency transactions during the year, and he does not want $3 to go to the Presidential Election Campaign Fund. Devon received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.

Devon's wife, Ariane, passed away in 2016. Devon's son, Tom, who is age 18, resides with Devon. Tom's Social Security number is 123-45-6788.

Devon owns a sole proprietorship for which he uses the accrual method of accounting and maintains no inventory; the business operates as Devons Copy Shop, 422 E. Main Street, Albuquerque, NM 87131, IRS business activity code: 453990. His revenues and expenses for 2020 are as follows.

Sales revenue	$740,000
Cost of goods sold (based on purchases for the year)	405,000
Salary expense	88,000
Rent expense	30,000
Utilities	8,000
Telephone	6,500
Advertising	4,000
Bad debts	5,000
Depreciation*	21,000
Health insurance**	26,000
Accounting and legal fees	7,000
Supplies	1,000

*New office equipment ($21,000); Devon chose to use the immediate expense election.

** $18,000 for employees and $8,000 for Devon.

Other income received by Devon includes the following.

Dividend income (qualified dividends):
Swan, Inc.	$10,000
Wren, Inc.	2,000
Interest income:
First National Bank	11,000
Second City Bank	2,500
County of Santa Fe, NM bonds	17,000

During the year, Devon and his sole proprietorship were involved in the following property transactions. Stock transactions were reported to Devon on Form 1099B; basis was not reported to the IRS.

1. Sold Blue, Inc. stock for $45,000 on March 12, 2020. He had purchased the stock on September 5, 2017, for $50,000.
2. Received an inheritance of $300,000 from his uncle, Henry. Devon used $200,000 to purchase Green, Inc. stock on May 15, 2020, and invested $100,000 in Gold, Inc. stock on May 30, 2020.
3. Received Orange, Inc. stock worth $9,500 as a gift from his aunt, Jane, on June 17, 2020. Her adjusted basis for the stock was $5,000. No Federal gift taxes were paid on the transfer. Jane had purchased the stock on April 1, 2014. Devon sold the stock on July 1, 2020, for $22,000.
4. On July 15, 2020, Devon sold one-half of the Green, Inc. stock for $40,000.
5. Devon was notified on August 1, 2020, that Yellow, Inc. stock he purchased from a colleague on September 1, 2019, for $52,500 had become worthless. Although he understood that investing in Yellow was risky, Devon did not anticipate that the corporation would declare bankruptcy.
6. On August 15, 2020, Devon received a parcel of land in Phoenix worth $220,000 in exchange for a parcel of land he owned in Tucson. Because the Tucson parcel was worth $245,000, he also received $25,000 cash. Devon's adjusted basis for the Tucson parcel was $210,000. He originally purchased it on September 18, 2017.
7. On December 1, 2020, Devon sold the condominium in which he had been living for the past 20 years (1844 Lighthouse Lane, Albuquerque, NM 87131) 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. Devon purchased the condominium for $180,000.

Devon's potential itemized deductions, exclusive of the aforementioned information, are as follows.

Medical expenses (before the 7.5%-of-AGI floor)	$9,500
Property taxes on residence	5,800
State income taxes	4,000
Charitable contributions	10,000
Mortgage interest on residence (First National Bank)	9,900
Sales taxes paid	5,000

During the year, Devon makes estimated Federal income tax payments of $35,000.

Required:

Compute Devon's Federal income tax payable or refund due for 2020 (assuming that he makes any available elections that will reduce the tax), and complete his tax return using appropriate forms and schedules and the Qualified Dividends and Capital Gain Tax Worksheet.

• Make realistic assumptions about any missing data.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Enter all amounts as positive numbers, unless instructed otherwise.
• It may be necessary to complete the tax schedules before completing Form 1040.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the 2020 tax rate schedule provided. Do not use the Tax Tables.

1040 Department of the Treasury-Internal Revenue Service (99) 2020 U.S. Individual Income Tax Return OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Filing Status Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (QW) Check only If you checked the MFS box, enter the name of your spouse. If you checked the HOH or QW box, enter the child's name if the qualifying one box. person is a child but not your dependent Your first name and middle initial Last name Your social security number If joint return, spouse's first name and middle initial Last name Spouse's social security number Home address (number and street). you have a P.O. box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your City, town, or post office. If you have a foreign address, also complete spaces below. State ZIP code spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change Foreign country name Foreign province/state/county Foreign postal code your tax or refund. You Spouse At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Yes No Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You: Were born before January 2, 1956 Are blind Spouse: Was born before January 2, 1956 Dis blind Dependents (see instructions): (2) Social security (3) Relationship (4) if qualifies for (see instructions): (1) First name number If more Last name to you Child tax credit Credit for other dependents than four dependents, see instructions and check here 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 Attach 2a Tax-exempt interest 2a b Taxable interest 2b Sch. Bif 3a Qualified dividends 3a required. 3b b Ordinary dividends 4a IRA distributions 4a b Taxable amount 4b 5a Pensions and annuities 5a b Taxable amount. 5b Standard Social security benefits b Taxable amount 6b Deduction for- 7 Capital gain or loss). Attach Schedule D if required. If not required, check here O 7 Single or Married filing 8 Other income from Schedule 1, line 9. 8 separately, $12,400 9 Add lines 1, 2, 3, 4, 5, 6, 7, and 8. This is your total income 9 Married filing 10 Adjustments to income: jointly or Qualifying From Schedule 1, line 22 10a widow(er). b $24,800 10b Charitable contributions if you take the standard deduction. See instructions Head of Add lines 10a and 10b. These are your total adjustments to income 10c household, $18,650 11 Subtract line 10c from line 9. This is your adjusted gross income 11 If you checked 12 Standard deduction or itemized deductions (from Schedule A) 12 any box under Standard 13 Qualified business income deduction. Attach Form 8995 or Form 8995-A 13 Deduction, 14 Add lines 12 and 13 14 see instructions. 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter-O- 15 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2020) a