You are a new staff accountant at the Kevin Malone CPA Group. Your boss, Kevin Malone, has given you the task of preparing a 1040 tax return for Saul Goodman and Kim Wexler for the tax year 2019.

Saul Goodman and his wife, Kim Wexler, are married with no children. Saul, age 35, is a self-employed attorney at Saul Goodman & Associates. His wife, Kim Wexler, age 30, is an attorney for a regional bank, Mesa Verde. Saul’s social security number is 222-00-2222. Kim’s social security number is 111-00-1111. Their address is 12345 Slippin’ Jimmy Road, Albuquerque, NM 87101.

Saul and Kim provide over half the support of Saul’s brother, Charles “Chuck” McGill, age 44, who suffers from an allergy to electricity. Chuck lives in his own residence by himself and earns no gross income during the year.

Saul and Kim report all of their income and expenses using the cash method. For 2019, they report the following items of income and expense:

Gross receipts from Saul’s law firm $121,500

Kim’s salary $73,500

Salary for Saul’s paralegal, Francesca Liddy $18,700

Salary for Saul’s bodyguard, Huel Babineaux $17,500

Saul’s legal malpractice insurance for his law firm $3,000

Office expenses for Saul’s law firm $3,200

Advertising expenses for Saul’s law firm $10,100

(including late night commercials, billboards, park benches, and matches)

Rent on Saul’s office building $12,150

Repairs and Maintenance for Saul’s law firm $5,400

Utilities expense for Saul’s law firm $10,050

Property taxes on their personal residence $10,790

Federal income taxes withheld on Kim’s salary $8,500

State income taxes withheld on Kim’s salary $4,300

Saul’s estimated tax payments for his law firm $8,500

Mortgage interest paid on personal residence $9,520

Income tax preparation for Form 1040 $6,550

Income tax preparation fee for Schedule C $1,100

Interest expense on Kim’s credit cards $1,050

Professional bookkeeping services from Skylar White for Saul’s law firm $3,500

Interest paid on Kim’s student loans from law school $875

Car registration expense (Personal Property) for Saul’s Cadillac DeVille $100

(Saul’s personal vehicle)

Interest expense on Saul’s personal savings account at Mesa Verde Bank $85

Saul’s old vehicle, a Suzuki Esteem, was destroyed and pushed off a cliff and $500

Saul had no car insurance. This was not a federally declared disaster.

Miscellaneous income (reported on form 1099-MISC) for Saul from $6,000

“Ice Station Zebra Associates”

(This income was for consulting work, separate from the legal work he

performs at Saul Goodman & Associates. $500 was withheld for federal

taxes. $100 was withheld for state taxes).

Saul and Kim had the following medical expenses out of pocket in 2019 (7.5% limit):

Kim’s dental expenses $2,450

Saul’s eyeglasses and exam $900

Vacation to Santa Fe to improve Saul and Kim’s general health $5,000

Saul’s weekly pedicures at Day Spa and Nail for his general health $3,000

Medical insurance premiums paid (after-tax basis) $6,075

(Saul and Kim are on Mesa Verde’s insurance plan)

Kim’s ER bill for her broken arm from a car accident $1,850

Saul and Kim sold the following capital assets and each asset’s cost basis was reported to the IRS on Form 1099-B:

Madrigal Corporation stock: acquired 2/12/18, sold 3/13/19, sales price of $24,000, cost
of $18,000

Beneke Fabricators stock: acquired 3/2/19, sold 7/7/19, sales price of $18,000, cost of
$20,000

HHM stock: acquired 6/8/14, sold 4/10/19, sales price of $10,000, cost of $14,000

*Saul owned the HHM stock and sold it to his brother, Chuck. Chuck turned
around and sold the stock to Howard Hamlin, an unrelated party, for $13,000

Saul donated $4,920 in cash to his alma mater, University of American Samoa Law School.

Saul’s business address is 12345 Inflatable Statute of Liberty Road, Albuquerque, NM 87101, has a code of 541100 and uses the cash method of accounting. Do not enter a business EIN.

Assignment

Prepare the Saul and Kim’s tax return and relevant forms. Use 2019 tax forms from irs.gov. You will need to prepare:

• Forms 1040 and 8949
• Schedules 1, 2, 3, A, B, C, D, and SE (Long Schedule in Section B, even though the long schedule is not required)