Practice Set # $2$

Eric and Mary are now retired. This practice set will not build on previous information, but will use the basic information, SS#$,$ address, etc of the Eric and Mary.

Eric Amoth $($Social Security Number $551-11-1111)$ is now $60$ years old and married to Mary Amoth, age $44,($Social Security Number $552-45-6789).$ They have no dependents. They file a joint return. Neither is interested in helping to fund the Presidential Election Campaign Fund. Both Eric and Mary have not worked this year.

Eric and Mary come to you for help with the preparation of their $2019$ tax return and have provided the details for the following transactions:

Neither is collecting social security. To fund their retirement they chose to sell their principal residence this year. They have lived at $1313$ Mockingbird Lane in Mockingbird Heights CA $92659$ for the past $20$ years. They are planning to sell and live on the proceeds until Eric is old enough to collect social security income. They purchased a mobile home in Carlsbad for $$360,000.$ The address is $1245$ Beachside Way, Carlsbad, CA $92011.$ A Form $1099$S will be issued. They originally paid $$165,000$ for their home and have made no improvements over the years, simply repairs. They sold on $3/16/19$ the house for $$450,000$ with selling expenses of $$22,500.$

On $6/1/2019$ they also sold for $$12,000$ land that they had held for several years. The full amount to be paid over $5$ years subject to a $5\%$ interest rate. The buyer has and will make payments of $$226\mathrm{.}45$ starting on June $1,2019.$ Because the $5\%$ exceeds the applicable federal rate for June $2019,$ no additional interest is imputed. In $2019,$ there were $7$ payments totally $$1,585\mathrm{.}15($$$226\mathrm{.}45$ x $7).$ According to the loan amortization schedule, $$1,250\mathrm{.}72$ represented principal and $$334\mathrm{.}43$ was interest. The Amoths had originally purchased the land for $$7,200.$

Lastly, the Amoths exchanged their apartment house at $26672$ Alamanda, Sant$$ Fe Springs with another investor for an apartment house at $23$ Main Street, Carlsbad, CA$.$ They thought it was a good idea to have their main investment near to them so they could keep an eye on it and not have to pay a property manager. The new apartment house is close enough to their new mobile home to be able to ride their bikes over. They are very excited and hope that the exchange is tax free as they have been told. This transaction closed on $1/1/2019.$ After the exchange, the Amoths had rental income of $$54,000$ and property taxes of $$22,000$ on the new apartment house. The original apartment had an adjusted basis in their hands of $$100,000$ and a FMV of $$220,000,$ subject to a mortgage of $$80,000.$ The apartment house owned by the other investor had an adjusted basis of $$175,000,$ a FMV of $$250,000,$ and is subject to a mortgage of $$150,000.$ The Amoths transfer their apartment house to the other investor and receive $$40,000$ in cash and the apartment house in Carlsbad. Each apartment house is transferred subject to the mortgage on it as the interest rates were very competitive. The property was placed in service on $1/1/19.$

Please prepare the $1040$