This is the third part of a six part problem that will allow you to prepare the 2014 tax return for Laurie and Lynn Norris. As with the previous parts, this part of the problem will ask you to prepare a portion of their tax return. You should complete the appropriate portion of each form or schedule indicated in the instructions. The following basic information is provided for preparing their 2014 tax return:

1. The Norrises contribute $250 to the political campaign of Fred Smithers who was running for Santa Fe city council.

2. Lynn spent $4,300 in lawyer and accounting fees to investigate the possibility of acquiring a competing handyman website company. Due to legal constraints, Lynn was unable to purchase the company.

3. Lynn began his business in October 2012. He uses a room in their home to operate his business. The room is 300 square feet of the 2,400 total square feet of the home. The Norrises incur the following expenses related to their home:

Mortgage interest $7,000

Property taxes 2,200

Insurance 850

Gas and electric 1,600

Repairs and maintenance 400

Cable television350

Phone ($10 per month for a separate phone number for the office) 245

House cleaning650

The home was worth $215,000 in October 2012, their basis is $175,000, the value of the land is 15% of basis, and the applicable depreciation percentage is 2.564%.

Required: Based on the information provided above, only fill out the appropriate portions of Form 1040 Schedule C and Form 8829.

SCHEDULE C (Form 1040) Profit or Loss From Business OMB No. 1545-0074 2015 (Sole Proprietorship) about Schedule C and its separate instructions is at www.irs.gov/schedulec. Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Information Department of the Treasury Internal Revenue Service (99) Attachment Sequence No. 09 Name of proprietor Social security number (SSN) A B Enter code from instructions Principal business or profession, including product or service (see instructions) C Business name. If no separate business name, leave blank. E Business address (including suite or room no.) F G H City, town or post office, state, and ZIP code Cash (2) Accrual (3) Other (specify) Accounting method: (1) Did you \"materially participate\" in the operation of this business during 2015? If \"No,\" see instructions for limit on losses If you started or acquired this business during 2015, check here . . . . . . . . . . . . . . . . . I J Did you make any payments in 2015 that would require you to file Form(s) 1099? (see instructions) . If "Yes," did you or will you file required Forms 1099? . . . . . . . . . . . . . . Part I D Employer ID number (EIN), (see instr.) Income . . . . . . . . 2 3 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the \"Statutory employee\" box on that form was checked . . . . . . . . . Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . 4 5 6 Cost of goods sold (from line 42) . . . . . . . . . . . . . . . . . . . Gross profit. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) . . . . . . . . . . 4 5 6 7 Gross income. Add lines 5 and 6 . . . 7 8 Advertising . 9 Car and truck expenses (see instructions) . . . . . Commissions and fees . 1 Part II 10 11 12 13 . . . . Contract labor (see instructions) Depletion . . . . . Depreciation and section 179 expense deduction (not included in Part III) (see instructions) . . . . . 14 Employee benefit programs (other than on line 19) . . Insurance (other than health) 15 16 . . . . . . . . . . . . . . . . Expenses. Enter expenses for business use of your home only on line 30. 8 9 10 Office expense (see instructions) 18 Pension and profit-sharing plans . Rent or lease (see instructions): Vehicles, machinery, and equipment 19 20a Other business property . . . Repairs and maintenance . . . Supplies (not included in Part III) . 20b 21 22 Taxes and licenses . . . . . Travel, meals, and entertainment: Travel . . . . . . . . . 23 24a 25 Deductible meals and entertainment (see instructions) . Utilities . . . . . . . . 24b 25 26 27a b Wages (less employment credits) . Other expenses (from line 48) . . Reserved for future use . . . 26 27a 27b 21 22 23 24 a 14 15 b 17 Interest: Mortgage (paid to banks, etc.) Other . . . . . . Legal and professional services 28 Total expenses before expenses for business use of home. Add lines 8 through 27a . . . . . . 28 29 30 Tentative profit or (loss). Subtract line 28 from line 7 . . . . . . . 29 a b 16a 16b 17 . . . . . . . . . . . . Use the Simplified . . . . . . . Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. 32 Yes Yes No No . . Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business: Method Worksheet in the instructions to figure the amount to enter on line 30 31 . No 2 3 19 20 b 13 . . . Yes 1 18 a 11 12 . . . . If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, line 3. If you checked 32b, you must attach Form 6198. Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P } } 30 31 32a 32b All investment is at risk. Some investment is not at risk. Schedule C (Form 1040) 2015 Page 2 Schedule C (Form 1040) 2015 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If \"Yes,\" attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . a b Cost c Lower of cost or market Other (attach explanation) 35 Inventory at beginning of year. If different from last year's closing inventory, attach explanation . . . 35 36 Purchases less cost of items withdrawn for personal use . . . . . . . . . . . . . . 36 37 Cost of labor. Do not include any amounts paid to yourself . . . . . . . . . . . . . . 37 38 Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . 38 39 Other costs . . . . . . . . . . . . . . . . . . . . . . . . . 39 40 Add lines 35 through 39 . . . . . . . . . . . . . . . . . . . . . . . . 40 41 Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . 41 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4 . . . . . . 42 Part IV . . . Yes . Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. / / 43 When did you place your vehicle in service for business purposes? (month, day, year) 44 Of the total number of miles you drove your vehicle during 2015, enter the number of miles you used your vehicle for: a No b Commuting (see instructions) Business c Other Yes No 45 Was your vehicle available for personal use during off-duty hours? . . . . . . . . . . . . . . 46 Do you (or your spouse) have another vehicle available for personal use?. . . . . . . . . . . . . . Yes No 47a Do you have evidence to support your deduction? . . . . . . . . . . . . . . . . . . . . Yes No If \"Yes,\" is the evidence written? . . . . . . . . . . . . . . . . . . . . Yes No b Part V 48 . . . . . . Other Expenses. List below business expenses not included on lines 8-26 or line 30. Total other expenses. Enter here and on line 27a . . . . . . . . . . . . . . . . 48 Schedule C (Form 1040) 2015 Form 8829 Department of the Treasury Internal Revenue Service (99) Expenses for Business Use of Your Home File only with Schedule C (Form 1040). Use a separate Form 8829 for each home you used for business during the year. Information about Form 8829 and its separate instructions is at www.irs.gov/form8829. Part of Your Home Used for Business 1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see instructions) . . . . . . . . . . . . . . . . 2 Total area of home . . . . . . . . . . . . . . . . . . . . . . . . . 3 Divide line 1 by line 2. Enter the result as a percentage . . . . . . . . . . . . . For daycare facilities not used exclusively for business, go to line 4. All others, go to line 7. hr. 4 Multiply days used for daycare during year by hours used per day 4 8,760 hr. 5 5 Total hours available for use during the year (365 days x 24 hours) (see instructions) . 6 6 Divide line 4 by line 5. Enter the result as a decimal amount . . . 7 Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 . . . . . Part II 31 32 33 34 35 See instructions for columns (a) and (b) before completing lines 9-21. 36 37 38 39 40 41 (a) Direct expenses 7 % 8 14 15 25 26 27 31 32 33 34 35 Depreciation of Your Home Enter the smaller of your home's adjusted basis or its fair market value (see instructions) . . Value of land included on line 36 . . . . . . . . . . . . . . . . . . . . . Basis of building. Subtract line 37 from line 36 . . . . . . . . . . . . . . . . Business basis of building. Multiply line 38 by line 7. . . . . . . . . . . . . . . Depreciation percentage (see instructions). . . . . . . . . . . . . . . . . . Depreciation allowable (see instructions). Multiply line 39 by line 40. Enter here and on line 29 above Part IV % (b) Indirect expenses Casualty losses (see instructions). . . . . 9 Deductible mortgage interest (see instructions) 10 Real estate taxes (see instructions) . . . . 11 Add lines 9, 10, and 11 . . . . . . . . 12 Multiply line 12, column (b) by line 7 . . . . 13 Add line 12, column (a) and line 13 . . . . Subtract line 14 from line 8. If zero or less, enter -0Excess mortgage interest (see instructions) . 16 Insurance . . . . . . . . . . . . 17 Rent . . . . . . . . . . . . . . 18 Repairs and maintenance . . . . . . . 19 Utilities . . . . . . . . . . . . . 20 Other expenses (see instructions). . . . . 21 Add lines 16 through 21 . . . . . . . . 22 23 Multiply line 22, column (b) by line 7 . . . . . . . . . . . Carryover of prior year operating expenses (see instructions) . . 24 Add line 22, column (a), line 23, and line 24 . . . . . . . . . . . . . . . . . Allowable operating expenses. Enter the smaller of line 15 or line 25 . . . . . . . . . Limit on excess casualty losses and depreciation. Subtract line 26 from line 15 . . . . . Excess casualty losses (see instructions) . . . . . . . . . 28 Depreciation of your home from line 41 below . . . . . . . 29 Carryover of prior year excess casualty losses and depreciation (see instructions) . . . . . . . . . . . . . . . . . . 30 Add lines 28 through 30 . . . . . . . . . . . . . . . . . . . . . . . . Allowable excess casualty losses and depreciation. Enter the smaller of line 27 or line 31 . . Add lines 14, 26, and 32. . . . . . . . . . . . . . . . . . . . . . . . Casualty loss portion, if any, from lines 14 and 32. Carry amount to Form 4684 (see instructions) Allowable expenses for business use of your home. Subtract line 34 from line 33. Enter here and on Schedule C, line 30. If your home was used for more than one business, see instructions Part III 1 2 3 Figure Your Allowable Deduction 8 Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home (see instructions) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 2015 Attachment Sequence No. 176 Your social security number Name(s) of proprietor(s) Part I OMB No. 1545-0074 36 37 38 39 40 41 % Carryover of Unallowed Expenses to 2016 42 Operating expenses. Subtract line 26 from line 25. If less than zero, enter -0- . . . . . . 43 Excess casualty losses and depreciation. Subtract line 32 from line 31. If less than zero, enter -0For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 13232M 42 43 Form 8829 (2015)