Problem

Amy and Charles Bodden files a Joint return.Amy owns a small business with revenue base of less than $75,000 per year.Amy's Social Security number is 115-78-3567 and Charles's 117-78-2221.Amy is an Avon consultant, she is not employed by Avon.Her investment is at risk.No assets were bought or sold during the 2019 tax year.

Her business is run out of her home.The business is classified as a non-store retailer and its code is 454390. She lives in a 3,500 square foot home at 511 Spotts Lane, Decatur, GA 30037.There is a strategically partitioned area with its own entrance and storeroom that is 500 square feet in size.This area is used exclusively for Amy's business.Her home was bought in 2018 although the business started in 2017; assume that the depreciation for the office started in 2017.The home is valued at $415,000.

Amy is quite meticulous in her record keeping and keeps a log to record all her travels.During 2019, Amy traversed her State and logged 15,000 miles with 9,500 of those attributable to the business.Assume that expenses for the car would be prorated based on miles driven.

The following are expenses and revenues for the 2019 business year.

Expenses/revenues

$

Expenses/revenues

$

Sales of Avon Products

75,000

Legal expenses

700

Advertising and Merchandising cost

1,200

Office supplies

275

Returns and Allowances

1,200

Sales Expenses -gifts

2, 400

Charitable contribution

600

Office cleaning

840

Car depreciation(business)

450

Taxes and license

3,450

Home office Depreciation

MACRS *

Purchases for 2019

37,500

Health Insurance

1,200

Telephone and Internet charges

2,200

Car Insurance

720

Miscellaneous expenses

750

Other Insurance

580

Conference expenses (entertainment -1,100)

3,500

(* ) Assume that the office depreciation is prorated based on the square footage of the office to the total home.

The beginning inventory is$1,250 and Inventoryat the end of 2019 was$3,170.

Charles and Amy are over the age of 66 with grown children. Charles is still employed and hopes to retire in 2024.He works as the Manager of People and Culture and Atlanta Piedmont College where his W-2 shows Gross Pay of $117,201. He paid state taxes of $7,020 and federal taxes of $19,924.He maxed out his 401-K plan in anticipation of his retirement in 2024.He paid $11,720 into the plan.

No refunds were received from the State or Federal Government during 2019.

Charles received the following qualified dividends of $ 4,234 and was paid bank interest $270, they both received Municipal bond interest of $712. There investment was in a government bond.

The Bodden's are ardent Church goers and made a contribution of 10% of Charles Sr gross pay for the year to their local Church, the total amount contributed was $11,721.In addition, they contributed clothing and furniture to the local Red Cross valued at $3,500, this was the FMV.

Amy is retired from her job as a nurse and receives Social Security payments of $2,743 per month and pays no tax on these payments.

Charles and Amy own a two bedroom apartment 15 minutes from their residence and receives $750 per month for it.They still have a mortgage on this property.The mortgage interest on the property for the year is $4,450 and the real estate tax paid is $1875 for the year. The condominium fees for the above property runs at $175.00 per month. The Bodden's began renting this property in 2018 after they bought their new property.The cost of the property for depreciation purposes was $ 92,000(Treat as residential property).

The Bodden's pay $1,500 for the real estate taxes and mortgage interest of $12,500 on their Primary Residence.

During the year qualified medical expenses incurred and not reimbursed amounted to $7,900, the Bodden's had major dental work done.In addition, they paid for medicines taken for heart and diabetes conditions.Miscellaneous expenses were $3,100.During the year, they went on a cruise and on their return found that the outer car garage was destroyed by a freak tornado that narrowly missed their house.The garage loss was estimated at $15,000, The insurance company agreed to pay $4,000 dollars after their deduction of $1,000.

During the year the following stock transactions took place to fund their Around the world trip.Tesla stocks purchased in 2014 for $3,700 was sold for $12,100 another batch of Coco Cola bought for $1,100 was sold for $4,500.Their investment in dollar tree stocks less than 10 months into the year started spiraling down four months after purchase, the cost at the time of purchase was $5,000, these stocks were sold for $1,200.They thought that they wanted to cut their losses and not lose all.

Required: (70 Points)

Download the schedules from the IRS website and prepare the following.

1. Schedule A, B, C, D and E (Supporting forms as well)
2. Show the Social Security Computation.
3. Complete the 1040 and compute the tax refund or taxes to be paid for 2019.