Use the following information to answer the questions below:

Erik (age 30) and Patty McHenry (age 29) are married taxpayers. Erik, a project manager, is employed by ABC Inc., Inc. In 2019, Erik had wages of $100,000. He had the following withheld: federal income taxes, $15,000, state income taxes of $6,000, and the appropriate amount of FICA. Erik incurred $3,000 of reimbursed employee business costs (which were not included in his w-2). In addition, Erik incurred $200 for business meals that were not reimbursed by his employer.

Patty owns a local retail store (she is a sole proprietor). The business is on a calendar year. This year, she had total revenue of $800,000 and the following expenses:

• Cost of goods sold, $560,000
• Salaries paid to an employee, $40,000
• Rent, $15,000
• Heat, utilities, $1200
• Display cases, $15,000, purchased on April 1.
• New computer that cost $2,000, purchased on November 15.
• Patty financed the purchase of the computer and display cases and paid $500 of interest.
• Patty attended a merchandise mart to meet and to place orders with new suppliers. She incurred an airfare of $500, hotel costs of $300, and meals for $250.
• Patty also drove 1000 miles to purchase merchandise from artists. She had a $100 parking fine for parking next to a hydrant. She also had $100 in parking fees.
• Patty has made estimated payments in 2019 (all for 2019 taxes) of $30,000 for the federal and $13,000 for the state.
• Pattys shop features high-style home items; therefore, Patty feels she must dress in suitable high-fashion clothing. Her clothing bill was $5,000.

Erik and Patty have two children. David, 6 years old and Kayla, an infant. Kayla was born three weeks prematurely on Oct. 15, 2019. Kayla was in the NICU (neonatal intensive care unit) for 1 week. While their insurance covered most of the costs, Erik and Patty incurred $10,000 in co-pays for her hospitalization.

Patty also needed a root canal. Her dentist charged $1,500. Pattys dental insurance covered $1000 of the cost and Patty paid the remaining $500.

In addition, Eriks mother, Jill, lives with them. Jill has $3,000 of social security income and $10,000 of municipal bond interest. Erik and Patty provide well over of Jills support. In 2019, Erik and Patty paid Southwestern Hospital $15,000 for Jills hospitalization.

Erik and Patty drove 500 miles to take Kayla and Jill to their medical appointments with doctors and physical therapists. None of these 2019 trips involved an overnight stay (i.e. there were no costs for hotels or meals.)

Erik and Patty own a home that they purchased 2 years ago for $400,000. Currently, their mortgage is $300,000. This year they took out a second mortgage on the house of $25,000. They used the $25,000 proceeds to pay off credit card bills, send the David to a summer camp, and to take a second honeymoon. They paid interest on the first mortgage of $16,000 and $2,000 on the second mortgage. Property taxes on the house were $8000.

They owed additional taxes for both their state and local taxes for 2018. Thus, on April 15, 2019, they wrote out checks of $1,500 for federal income tax and $500 for state income taxes.

Patty and Erik live in a small town with an annual film festival. Since their home is located close to the downtown area, it was in an excellent location for attendees. They decided to move out of their home for four days and rent their home on VRBO. They received $8,000 from renting their home for this event.

Patty and Erik donated $9,000 to qualified charities. In addition, Patty donated inventory from her store to a local charity auction. This inventory cost Patty $200, but this inventory had a fair market value of $500.

Erik had a fender bender on the way to work. Erik was not injured, but it cost $8,000 to repair the car. Their insurance company covered $6,000 of the costs. Patty and Erik had to pay the additional $2,000 in repair costs.

What is Patty and Erik's AGI?

What is Patty's Income from her sole propreitorship?

What are their itemized deductions?