ROBLEM $(30$ points$)$

Trailer Swift and her husband, Notso, file a joint income tax return. In $2023,$ Trailer earned $$1,000,000$ in salary from performing as a musician, and from

selling songs about being dumped by past boyfriends. In $2023,$ Notso was unemployed. The Swifts own a social media company called Blabber, which

has conducted business since $2015.$ The Swifts are active in running Blabber, which they own equally. The income or loss from Blabber is reported on

Schedule C of their income tax return.

In $2023,$ The Swifts had the following items of income and loss, in addition to Trailer$$s salary:

Qualified dividends from Dunder Mifflin Common Stock $$10,000$

Operating loss from Blabber business $($$$100,000)$ consisting of customer revenues of $$75,000,$ salaries and wages of

$50,000,$ depreciation expense of $$50,000,$ utilities $$75,000.$

They had the following stock sales in $2023$:

Date Purchased Date sold Cost basis Sales Price

$100$ shares of ABC Corp $3/1/20238/15/2023$ $$50,000$ $$30,000$

$200$ shares of XYZ Corp $9/1/202010/1/2023$ $$60,000$ $$120,000$

The Swifts have a short term capital loss carryforward from $2021$ in the amount of $$10,000.$

In addition, the Swifts in $2023$ sold their Blabber office in Old Forge, PA$.$ and realized the following:

Date purchased Purchase price Depreciation claimed to date Cash sale price Debt assumed by buyer

Land $1/18/2015$ $$100,000$ $$0$ $$120,000$ $$60,000$

Building $1/18/2012$ $$300,000$ $$70,000$ $$330,000$ $$0$

Office furniture and

computers $1/20/2020$ $$100,000$ $$50,000$ $$60,000$ $$0$

In $2021,$ the Swifts had a tax loss on the sale of a pick$-$up truck used in Blabber$$s business in the amount of $$20,000$

In $2023,$ Trailer sold an Andy Warhol autographed painting for $$80,000.$ She paid $$40,000$ for the painting in $2021.$

The Swifts take the standard deduction. Neither of the Swifts are over $65$ years old, and their eye sight is good.

The Swifts are in the $37\%$ tax bracket, which means their capital gain rate is $20\%.$

SOLVE:

$1.$ Compute capital gains or loss from the sale of capital assets

$2.$ Compute Sec $1231,1250,1245$ gains or losses from sale of business assets

$3.$ Compute $2023$ taxable income

$4.$ Compute $2023$ income tax. Disregard net investment income tax and self$-$employment tax.

If you wish to use IRS tax forms to do this problem you may do so$.$ You can get forms on www$.$IRS.gov

You need not complete these forms. You can prepare your own schedules if you wish. If you want to use tax forms, you should use the

following forms:

Form $1040$

Schedule $1$

Schedule B

Schedule C

Schedule D

Forms $8949$

Form $4797$

Qualified Dividends and Capital Gains Tax Worksheet