The previous year was Amy’s first year of operating the bookstore. Amy and Ken elected to carry forward a $4,752 net operating loss from the first year of business into 2015. (Note: Net operating losses are reported on the “Other Income” line of Form 1040.)

This year, Amy loaned a friend $20,000 so that he could make an investment. Instead of making the investment, the friend lost all the money gambling and left for parts unknown. Amy has no hope of ever collecting on this bad debt.

Ken, who ordinarily never gambles, won $25,000 at a casino birthday party for one of his friends. This amount should be reported on the “Other Income” line of Form 1040.

The Booths support Ken’s parents, Rod (Social Security number 124-80-9050) and Mary (Social Security number 489-37-6676) Booth, who live in their own home. Ken and Amy live at 2345 Wilson Avenue, Menomonie, WI, 54751, and their Social Security numbers are 343-75-3456 (Ken) and 123-45-7890 (Amy).

Required: Complete the Booths’ federal income tax return for 2015. Use Form 1040, Schedule C, Schedule D, and Form 8949, on Pages 3-49 to 3-56, and any other appropriate schedule(s) you need to complete this tax return. A statement is required to be attached to a return for a nonbusiness bad debt, but this requirement may be ignored for this problem. Assume no 1099-B is filed in association with the bad debt when filling out Schedule D.

Ken (age 31) and Amy (age 28) Booth have brought you the following information regarding their income, expenses, and withholding for the year. They are unsure which of these items must be used to calculate taxable income. Income: Ken's salary (salesman) Amy's wages (part-time nurse) Insurance reimbursement for repairs from an auto accident Gift from Uncle George Interest income from Lodge State Bank Federal income taxes withheld: From Ken's salary From Amy's wages $28,100 17,900 500 2,000 674 2,200 650