Overview Problem Elmer and Helen are married and live in Houston, Texas with their two children. Elmer is a physics professor and has a salary of $50,000 a year. Helen has a sole-proprietorship catering business, and last year (Year 1) had gross receipts of $125,000. In completing this problem assume no post-1986 inflation has occurred, and that Elmer and Helen file a joint return. Assume that all transactions occurred in Year 1 (a tax year after 2017). 1) In addition to the above, Elmer and Helen had additional sources of income in Year 1 as follows: * $500,000 of inheritance to Helen from her Uncle Roy's estate * $10,000 of interest on the $500,000 inheritance while in probate * $10,000 dividend payment from a U.S. corporation * $5,000 award as Successful Business Woman of the Year * $3,000 settlement of a physical personal injury suit * Several years ago, Helen purchased a widget for her business for $55,000. She took a total of $10,000 depreciation on the widget. Helen sold the widget for $100,000. * Elmer and Helen sold some stock for $17,000 which they purchased several years ago for $20,000. They also sold stock for $3,000 which they purchased 3 months ago for $5,000. What is Elmer and Helen's gross income for Year 1? 2) In Year 1 Helen purchased a pastry oven for her catering business for $100,000. The oven has a 5-year recovery period, and Helen uses the accelerated cost recovery system (ACRS) and made no 179 election and elected out of 168(k). In addition to the pastry oven, Helen's business has the following expenses: (a) $30,000 for food, (b) $18,000 for rent, (c) $1,000 for utilities and (d) $31,000 for salaries. What is Elmer and Helen's adjusted gross income (AGI) for Year 1 ? 3) In Year 1 Elmer and Helen also have the following expense items: * $2,000 for Elmer to attend an educational seminar related to his teaching * $200 for books and magazines related to his teaching * $100 for periodicals on sports and home decorating * $15,000 for mortgage interest payments on their principal residence * $13,000 for property taxes on their principal residence * $2,000 medical care expenses * $20,000 to add a guest room and bath to their home Elmer and Helen plan to file a joint return. Should they take the standard deduction or elect to itemize their deductions for Year 1 ? 4) What is Elmer and Helen's taxable income based on the above facts if they have 2 children under age 17? 5) What is Elmer and Helen's tax liability for Year 1 using the tax tables for 2022 (located in the back of your Code book)? 6) What is Elmer and Helen's tax due in Year 1 if Elmer's employer withheld $8,000 in taxes and Helen paid $10,000 in estimated taxes