Tute. 11s Problem TUI Lie Zuty tax year. David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental hygienist for a chain of dental clinics. David earned consulting fees of $145,000 in 2019. He maintains his own office and pays for all business expenses. The Coles are adequately covered by the medical plan provided by Ella's employer but have chosen not to participate in its $ 401(k) retirement plan. David's employment-related expenses for 2019 are summarized below. Airfare $8,800 Lodging 4,615 Meals (during travel status) 4,800 Entertainment 3,600 Ground transportation (e.g., limos, rental cars, and taxis) Business gifts 900 Office supplies (includes postage, overnight delivery, and copying) 1,500 The entertainment involved taking clients to sporting and musical events. The business gifts consisted of $50 gift certificates to a national restaurant. These were sent by David during the Christmas holidays to 18 of his major clients. 800 In addition, David drove his 2017 Ford Expedition 11,000 miles for business and 3,000 for personal use during 2019. He purchased the Expedition on August 15, 2016, and has always used the automatic (standard) mileage method for tax purposes. Parking and tolls relating to business use total $340 in 2019. When the Coles purchased their present residence in April 2016, they devoted 450 of the 3,000 square feet of living space to an office for David. The property cost $440,000 ($40,000 of which is attributable to the land) and has since appreciated in value. Expenses relating to the residence in 2019 (except for mortgage interest and property taxes; see below) are as follows: Insurance $2,600 Repairs and maintenance 900 Utilities 4,700 Painting office area; area rugs and plants in the office)* 1,800 *Treat as a direct office in home expense. In terms of depreciation, the Coles use the MACRS percentage tables applicable to 39-year nonresidential real property. As to depreciable property (e.g., office furniture), David tries to avoid capitalization and uses whatever method provides the fastest write- off for tax purposes. must provide and maintain her own uniforms. Her expenses for 2019 appear below. Uniforms $690 380 State and city occupational licenses Professional journals and membership dues in the American Dental Hygiene Association Correspondence study course (taken online) dealing with teeth whitening procedures 340 420 Ella's salary for the year is $42,000, and her Form W-2 for the year shows income tax withholdings of $4,000 (Fed (state) and the proper amount of Social Security and Medicare taxes. Besides the items already mentioned, the Coles had the following receipts during 2019. Interest income- State of Colorado general purpose bonds $2,500 IBM bonds 800 Wells Fargo Bank 1,200 $4,500 Federal income tax refund for year 2018 510 Life insurance proceeds paid by Eagle Assurance Corporation 200,000 Inheritance of savings account from Sarah Cole 50,000 Sales proceeds from two ATVs 9,000 For several years, the Coles' household has included David's divorced mother, Sarah, who has been claimed as the late December 2018, Sarah unexpectedly died of cardiac arrest in her sleep. Unknown to Ella and David, Sarah had policy and a savings account (with David as the designated beneficiary of each). In 2018, the Coles purchased two After several near mishaps, they decided that the sport was too dangerous. In 2019, they sold the ATVs to their ne . $4,500 Additional expenditures for 2019 include: Funeral expenses for Sarah Taxes, Real property taxes on personal residence Colorado state income tax due (paid in April 2019 for tax year 2018) $6,400 310 6,710 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 42,000 b 2a Tax-exempt interest .. 2a 2,500 Taxable interest. Attach Sch. B if required 2b 2,000 b 3a Qualified dividends... Ordinary dividends. Attach Sch. B if required 3b 4a IRA distributions ..... 4a b Taxable amount. 4b C Pensions and annuities 4c d Taxable amount . 4d 5a Social security benefits 5a b Taxable amount 5b 6 Capital gain or loss). Attach Schedule D if required. If not required, check here ... 6 7a Other income from Schedule 1, line 9 7a 1,800 x b Add lines 1, 2b, 3b, 46, 4d, 5b, 6, and 7a. This is your total income. 7b 0 x 8a Adjustments to income from Schedule 1, line 22. 8a b Subtract line 8a from line 7b. This is your adjusted gross income 8b 145,000 X 9 Standard deduction or itemized deductions (from Schedule A) ..... 9 24,400 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A.. 10 39,968 X 11a Add lines 9 and 10 lla 0 x b Taxable income. Subtract line 11a from line 8b. If zero or less, enter-O-.. 11b 151,532 X ure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2019) ) David R. and Ella M. Cole 123-45-6788 Page 2 12a Tax (see inst.) Check if any from Form(s): 1 - 8814 2 4972 3 12a 0 X b Add Schedule 2, line 3, and line 12a and enter the total 12b 0 X 13a Child tax credit or credit for other dependents. 13a I!--- LLLLL 12a Tax (see inst.) Check if any from Form(s): 1 - 8814 2 - 4972 30 12a 0 x b Add Schedule 2, line 3, and line 12a and enter the total 12b 0 x 13a 13a Child tax credit or credit for other dependents b Add Schedule 3, line 7, and line 13a and enter the total V 13b 14 Subtract line 13b from line 12b. If zero or less, enter -- 14 15 Other taxes, including self-employment tax, from Schedule 2, line 10 15 9,000 X 16 Add lines 14 and 15. This is your total tax 16 0 X 17 Federal income tax withheld from Forms W-2 and 1099 17 4,000 18 Other payments and refundable credits: 18a If you have a qualifying child, attach Sch. EIC. If you have nontaxable combat pay, see instructions. a Earned income credit (EIC)... b Additional child tax credit. Attach Schedule 8812 . 18b c American opportunity credit from Form 8863, line 8 18C d Schedule 3, line 14 ... 18d 24,000 e Add lines 18a through 18d. These are your total other payments and refundable credits ... 18e 24,000 19 Add lines 17 and 18e. These are your total payments ... 19 28,000 20 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid.. 20 0 X 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here - 21a 0 X