Tony and Jeannie Nelson are married and file a joint return. They have four children whose ages are: 12,15,19 & 23. The three youngest live at home with their parents and qualify as their dependents. The oldest Roger got married on 5/5 2018 and lives with his wife, Jane. They provide you with the following information regarding their 2018 tax return: 1. Tony Nelson is an aerospace engineer he runs an engineering firm, Nelson Engineering, as a sole-proprietorship and has very lucrative contracts with numerous aerospace companies. Tony rents an office downtown where he meets with clients and conducts business. Tony reported the following items of income and expenses from his engineering firm: Revenue $655,000 Wages expense $162,000 Rent Expense $ 60,000 Depreciation $ 3,400 Other Expenses $ 54,000 2. Jeannie Nelson is an artist, she works part-time teaching art 2 days a week at a magnet art school in their town. She earned $12,500 in salary from Cocoa Beach, School of the Arts. She is not covered under their insurance plan as she only works 15 hours a week. She also volunteers with the Girl Scouts of America and helps encourage the arts. 3. Jeannie is known for beautiful Arabian influenced abstracts. On March and September of this past year she had an exhibition and sold several paintings at each. She estimates that the cost of each painting in canvas and supplies is about $350. The sales are as follows: March 17- 14 paintings for $1,200 each $ 16,800 September 17 12 paintings at $1,500 $ 18,000 She paints in a studio located in a separate building on the property of their home. The expenses related to the studio allocated on the basis of square footage are as follows: Depreciation $3,500 Taxes $1,900 Utilities $2,400 4. The Nelsons sold the following assets during this year: a. 4/4/2018 sold for $20,000 stock in York Co. that was purchased for $11,500, on 2/14/2009 b. 7/1/2018 200 shares of New Co. for $32,000 total that were purchased on 8/7/2017 for $13,500. c. 7/15/2018 150 shares of City Co for $12,000 total that were purchased for $13,250 on 1/18/2018 d. 8/5/2018 sold for $27,000 an antique necklace that Jeannie inherited from her great-aunt on January 16, 2018 when its FMV was $25,500. e. 10/1/2018, they sold a portion of a parcel of land for $35,000 that had a basis of $16,000 and was purchased in 2002. f. 11/15/2018 sold stock in Space Explorers Inc. for $31,000 that they had purchased on 8/14/2015 for $26,000. g. The Nelsons have a Long-term loss carryover of $24,000 from 2017. 5. On April 13, the couple paid their $1,800 in state taxes with their 2017 state tax return. During 2018, they also paid $3,200 in state taxes for 2018. The couples state and local sales taxes for 2018 were $2,900. The property taxes paid on their principal residence for 2018 is $7,500, excluding any amounts allotted to the artist studio. 6. On October 1st they donated the portion of the parcel with a small building to the Girl Scouts of America for use as an art studio. They had purchased the building in 2002 and recently divided a portion for sale as undeveloped land (see 4d above). The portion with the building has a basis of $61,500. A professional appraiser determined the fair market value of the property was $97,000 on September 24th of 2018. 7. Tony & Jeannie both received corrective eye surgery, at a total cost of $6,200 (not reimbursed by insurance.) They also spent $2,300 for braces for the 15 year old (not reimbursed by insurance). In addition, they paid $6,500 in health insurance premiums to cover the family. 8. The Nelsons spent $ 12,100 in home mortgage interest on their original acquisition cost of $550,000 from 2001. They do not have any additional mortgage debt. 9. The Nelsons paid quarterly estimated tax payments of $15,000 per quarter, based on their 2017 liability of $42,500. Using the above information answer the following, be sure to show your work: A. (10 points) Compute the taxable income from Nelson Engineering. B. (10 points) Compute the taxable income related to Jeannies Abstracts. C. (18 points) Complete the following chart related to the Nelson familys sale of assets, (the gain or loss computed in column 4 must be assigned to the appropriate columns in 5-7): (1) (2) (3) (4) = (2)-(3) (5) (6) (7) Item Sales Proceeds Cost Basis Gain/ (Loss) Short-Term Gain (Loss) Long-Term Gain (Loss) Collectible Gain/(Loss) a b c d e f. D. (5 points) Compute the total gross income of the Nelson family. E. (10 points) Review the items above and compute the amount deductible for each. F. (5 points) Compute the Adjusted Gross Income of the Nelsons. G. (10 points) Compute the taxable income for the Nelsons. H. (10 points) Based on the information provided determine if the Nelsons qualify for any tax credits. I. (10 points) Compute the total tax liability for 2018 taking into account the character of the taxable income computed in part G above. J. ( 2 points) Compute the tax due or receivable for the Nelsons.