Tax Return Assignment

You are a new staff accountant at Sweet Liberty Tax Services. Your boss, Betsy Kettleman, has given you the task of preparing a $1040$ tax return for Saul Goodman and Kim Wexler for the tax year $2023.$

Saul Goodman and his wife, Kim Wexler, are married with no children. Saul, age $33,$ is a self$-$employed attorney at Saul Goodman & Associates. His wife, Kim Wexler, age $30,$ is an attorney for a regional bank, Mesa Verde. Saul$$s social security number is $222-00-2222.$ Kim$$s social security number is $111-00-1111.$ Their address is $12345$ Slippin$$ Jimmy Road, Albuquerque, NM $87101.$

Saul and Kim provide over half the support of Saul$$s brother, Charles $$Chuck$$ McGill, age $43,$ who suffers from an allergy to electricity $($not considered a disability for tax purposes$).$ Chuck lives in his own residence by himself and earns no gross income during the year. His social security number is $333-00-3333.$

Saul and Kim report all of their income and expenses using the cash method. For $2023,$ they report the following items of income and expense:

Gross receipts from Saul$$s law firm $$125,068$

Kim$$s salary from Mesa Verde $$98,050$

Wages for Saul$$s bodyguard, Huel Babineaux $$14,000$

$($Huel protects Saul from rowdy clients at his law firm$)$

Wages for Saul$$s paralegal, Francesca Liddy $$20,500$

Saul$$s legal malpractice insurance for his law firm $$2,100$

Saul$$s New Mexico law license annual fees $$400$

Office expenses for Saul$$s law firm $$4,835$

Advertising expenses for Saul$$s law firm $$9,500$

$($including late night commercials, billboards, park benches, and matches$)$

Rent on Saul$$s office building $$13,160$

Repairs and Maintenance for Saul$$s law firm $$1,400$

Utilities expense for Saul$$s law firm $$10,085$

Saul$$s personal gym membership at H$.$O$.$ Ward Boxing Gym $$500$

Property taxes on their personal residence $$9,790$

Federal income taxes withheld on Kim$$s salary $$6,000$

State income taxes withheld on Kim$$s salary $$3,000$

Saul$$s estimated federal tax payments for his law firm $$12,000$

Saul$$s estimated state tax payments for his law firm $$2,000$

Mortgage interest paid on personal residence $$9,000$

Cost for Saul$$s $$Hamlindigo Blue$$ business suit $$2,000$

$($suit was worn for personal reasons$)$

Income tax preparation for Form $1040$ $$2,965$

Income tax preparation fee for Schedule C $$1,440$

Interest expense on Kim$$s personal credit cards $$850$

Professional bookkeeping services from Skylar White for Saul$$s law firm $$4,500$

Interest paid on Kim$$s student loans from law school $$1,000$

Car registration expense $($Personal Property$)$ for Saul$$s Cadillac DeVille $$199$

$($Saul$$s personal vehicle$)$

$($This fee qualifies as an itemized deduction$)$

Interest income on Saul$$s personal savings account at Mesa Verde Bank $$152$

Saul$$s old vehicle, a Suzuki Esteem, was destroyed and pushed off a cliff and $$2,088$

Saul had no car insurance. This was not a federally declared disaster.

Saul had the following depreciation$-$related expenses:

$7-$year office equipment placed in service in $12/1/2022$ $$4,000$

$5-$year office computer placed in service on $2/4/2023$ $$3,000$

$*$Saul elected to use Section $179$ expensing in $2023$ but did NOT elect Section $179$ expensing or Bonus depreciation in $2022.$ Saul began depreciating assets placed in service in $2022$ using MACRS depreciation.

Saul and Kim had the following medical expenses out of pocket in $2023$:

Kim$$s dental expenses $$2,100$

Saul$$s eyeglasses and exam $$500$

Vacation to Santa Fe to improve Saul and Kim$$s general health $$5,500$

Saul$$s weekly pedicures at Day Spa and Nail for his general health $$2,500$

Medical insurance premiums paid $($after$-$tax basis$)$ $$8,000$

$($Saul and Kim are on Mesa Verde$$s insurance plan$)$

Kim$$s ER bill for her broken arm from a car accident $$1,750$

Saul and Kim sold the following capital assets and each asset$$s cost basis was reported to the IRS on Form $1099-$B:

Madrigal Corporation stock: acquired $2/10/22,$ sold $3/13/23,$ sales price of $$23,000,$ cost of $$18,000$

Beneke Fabricators stock: acquired $3/3/23,$ sold $7/7/23,$ sales price of $$16,000,$ cost of

$$20,000$

HHM stock: acquired $6/7/15,$ sold $4/10/23,$ sales price of $$12,000,$ cost of $$14,000$

$*$Saul owned the HHM stock and sold it to his brother, Chuck. Chuck turned

around and sold the stock to Howard Hamlin, an unrelated party, for $$13,000$

Saul donated $$12,500$ in cash to his alma mater, University of American Samoa Law School $($GO LAND CRABS!$).$

Saul$$s business address is $12345$ Inflatable Statute of Liberty Road, Albuquerque, NM $87101,$ has a code of $541100$ and uses the cash method of accounting. Do not enter a business EIN.

Some helpful tips:

Saul$$s business qualifies for the Qualified Busine