1. Suppose you have a client that come to you for help with figuring out their taxable income. Based on the data in the links below, you must determine the federal taxable income for each client for tax year 2020.
2. Create an Excel document for the client.
3. Compile your answers within the spreadsheet to show income minus above the line and below the line deductions to arrive at taxable income.

Client 1 is Mr. Jake Smith. He divorced Mrs. Terry Smith March 1, 2018. The divorce decree required Mr. Smith to make the following payments:

1. Title to the primary residence was transferred to Terry. The fair market value of the home is $225,000 and the basis is $175,000.
2. Jake must pay $1,600 per month mortgage payments on the house, which has 15 years remaining. The payments will end at Terry death.
3. Jake must pay $1,000 per month for 10 years in support payments to Terry, of which $400 per month is child support.
4. Jake insisted that the children attend private schools. In 2020, Jake paid $1,800 in tuition for private high school.

Jake paid his lawyer $4,000 to represent him in the divorce. The children reside with Terry, and Jake has agreed to allow Jake to claim one child as a dependency exemption. This agreement is in writing and signed by Terry prior to December 31, 2018.

In addition to the above, Jake owns an apartment complex. Each new tenant pays $850 for a security deposit, which is refundable upon vacating the apartment. In 2020, Jake collected $2,550 in security deposits and $16,000 in rental income.

Jake won first prize in a raffle in 2020. The prize is a new car with a window price of $22,000. Jake discovered that the car price is $20,000 when he checked around at multiple dealerships.

Jake makes $75,000 a year for his annual salary plus a bonus of $5,000 that would be received January 2021. Jake has itemized deductions of $20,500.