Note: This problem is for the 2022 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 digital asset transactions during the year, and he does not want $3 to go to the Presidential Election Campaign Fund.

Devon's wife, Ariane, passed away in 2018. 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 Devon's Copy Shop, 422 E. Main Street, Albuquerque, NM 87131, IRS business activity code: 459990. His revenues and expenses for 2022 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.

**Other income received by Devon includes the following $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 1099-B; basis was not reported to the IRS.

1. Sold Blue, Inc. stock for $45,000 on March 12, 2022. He had purchased the stock on September 5, 2019, 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, 2022, and invested $100,000 in Gold, Inc. stock on May 30, 2022.
3. Received Orange, Inc. stock worth $9,500 as a gift from his aunt, Jane, on June 17, 2022. 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, 2016. Devon sold the stock on July 1, 2022, for $22,000.
4. On July 15, 2022, Devon sold one-half of the Green, Inc. stock for $40,000.
5. Devon was notified on August 1, 2022, that Yellow, Inc. stock he purchased from a colleague on September 1, 2021, 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, 2022, 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, 2019.
7. On December 1, 2022-, 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 previous 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 2022 (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 2022 tax rate schedule provided. Do not use the Tax Tables.

1. Complete Devon's Form 1040 for 2022.

2. Complete Devon's Schedule 8812.

3. Complete Devon's Form 8995 for 2022

4. Complete Devon's Form 8824.

5. Complete Devon's Form 4562. The threshold cost of Section 179 property for 2022 is $2,700,000 and maximum Section 179 is $1,080,000.

The worksheet will assist you in determining the tax liability. If an amount is zero, enter "0".

Use the 2022 Tax Rate Schedule provided. Do not use the Tax Tables.

6. Qualified dividends and Captial Tax Worksheet

7. Complete Devon's Schedule 1 below for 2022. If required, use the minus to indicate a loss.

8. Complete the Devon's Schedule 2 for the 2022.

9. Complete Devon's Schedule A.

10. Complete Devon's Schedule B.

11. Complete Devon's Schedule C.

12. Complete Devon's Schedule D.

13. Complete Devon's Form 8949. If required, use the minus to indicate a loss.

Note: There are two "page 2" for you to complete.

14. Complete Devon's Schedule SE.

If required, amounts to the nearest dollar.

2022 Tax Rate Schedules

Question Content Area

Use the 2022 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables.)

2022 Tax Rate Schedules
SingleSchedule X	Head of householdSchedule Z
If taxable income is: Over		But not over		The tax is:		of the amount over			If taxable income is: Over		But not over		The tax is:		of the amount over
$ 0		$ 10,275		. . . . . .	10%		$ 0			$ 0		$ 14,650		. . . . . .	10%		$ 0
10,275		41,775		$ 1,027.50	+	12%		10,275			14,650		55,900		$ 1,465.00	+	12%		14,650
41,775		89,075		4,807.50	+	22%		41,775			55,900		89,050		6,415.00	+	22%		55,900
89,075		170,050		15,213.50	+	24%		89,075			89,050		170,050		13,708.00	+	24%		89,050
170,050		215,950		34,647.50	+	32%		170,050			170,050		215,950		33,148.00	+	32%		170,050
215,950		539,900		49,335.50	+	35%		215,950			215,950		539,900		47,836.00	+	35%		215,950
539,900		. . . . . .		162,718.00	+	37%		539,900			539,900		. . . . . .		161,218.50	+	37%		539,900
Married filing jointly or Qualifying widow(er)Schedule Y-1	Married filing separatelySchedule Y-2
If taxable income is: Over		But not over		The tax is:		of the amount over			If taxable income is: Over		But not over		The tax is:		of the amount over
$ 0		$ 20,550		. . . . . .	10%		$ 0			$ 0		$ 10,275		. . . . . .	10%		$ 0
20,550		83,550		$ 2,055.00	+	12%		20,550			10,275		41,775		$ 1,027.50	+	12%		10,275
83,550		178,150		9,615.00	+	22%		83,550			41,775		89,075		4,807.50	+	22%		41,775
178,150		340,100		30,427.00	+	24%		178,150			89,075		170,050		15,213.50	+	24%		89,075
340,100		431,900		69,295.00	+	32%		340,100			170,050		215,950		34,647.50	+	32%		170,050
431,900		647,850		98,671.00	+	35%		431,900			215,950		323,925		49,335.50	+	35%		215,950
647,850		. . . . . .		174,253.50	+	37%		647,850			323,925		. . . . . .		87,126.75	+	37%		323,925