You have been hired as a tax advisor for Tony and Pepper's 2020 tax return. Tony and Pepper are married and have two children, Carol, age 23 and Howard age 12. Carol is currently in college at State University getting her master's degree in accounting. Tony works as a design engineer for a manufacturing firm while Pepper runs a Sewing business from their home. Pepper's Sewing business consists of making Sewing items for sale at fairs that are held periodically at various locations. Pepper spends considerable time and effort on her Sewing business and it has been consistently profitable over the years. Tony and Pepper own a home and pay interest on their home loan (balance of $220,000). Neither Tony nor Pepper is blind or over age 65. Tony and Pepper have summarized the income and expenses they expect to report this year as follows: Income: Tony's salary $ 110,000 Pepper's sewing sales 20,400 Interest from certificate of deposit 1,650 Interest from municipal bond funds 920 Gain from the sale of Facebook stock purchased in 2015 5,000 Gain from the sale of Spotify stock purchased in 2020 2,000 200 Gambling winnings Expenditures: Federal income tax withheld from Tony's wages State income tax withheld from Tony's wages Social Security tax withheld from Tony's wages State sales tax paid $ 15,700 6,300 7,482 3,150 Expenditures: Federal income tax withheld from Tony's wages $ 15,700 State income tax withheld from Tony's wages 6,300 Social Security tax withheld from Tony's wages 7,482 State sales tax paid 3,150 Home mortgage interest 15,000 2,300 2,400 Interest on Visa credit card Tony's employee expenses (unreimbursed) Tax Return Preparation fees for personal taxes 500 Cost of Pepper's sewing supplies 3,000 Postage for mailing sewing projects 200 Travel and lodging for sewing fairs 2,230 Total Self-employment tax on Pepper's Sewing income 2000 Interest on loans to pay Carol's tuition 1,000 Carol's room and board at college 12,620 Pepper paid a total of $3,400 in health insurance premiums during the year (not through an exchange). Pepper was not eligible for health insurance through Tony's employer. They paid medical expenses of 15,690 for a broken ankle and 3,000 for Lasik eye surgery (they received no insurance reimbursement). They also incurred $450 of other medical expenses for the year. Tony and Pepper paid $2,500 of real estate taxes on their residence. Additionally, they paid a $200 property tax based on the state's estimate of the value of their car. Tony sustained $2,000 in gambling losses over the year (mostly horse-racing bets). Tony and Pepper paid $2,500 of real estate taxes on their residence. Additionally, they paid a $200 property tax based on the state's estimate of the value of their car. Tony sustained $2,000 in gambling losses over the year (mostly horse-racing bets). Tony and Pepper made several charitable contributions throughout the year. They contributed stock in ZYX Corp. to the Red Cross. On the date of the contribution, the FMV of the donated shares was $1,000 and her basis in the shares was $400. They originally bought the ZYX Corp. stock in 2008. They also contributed $500 cash to their church. Find (and clearly label) the following: 1. Gross Income (10pts). 2. AGI (20pts) 3.Taxable income (20pts). 4.Federal Income Tax liability (20 pts). 5.Calculate the amount of their refund or payment (15 pts)