Ken (birthdate July 1, 1988) and Amy (birthdate July 4, 1990) Booth have brought you the following information regarding their income, expenses, and withholding for the year. They are unsure which of these items must be used to calculate taxable income. Income: Ken’s salary (salesman) Amy’s wages (parttime nurse) Insurance reimbursement for repairs from an auto accident Gift from Uncle George Interest income from Lodge State Bank Federal income taxes withheld: From Ken’s salary From Amy’s wages $28,500 17,500 500 2,000 840 2,600 650 Amy owns and operates a computer bookstore named “The Disk Drive.” The store is located at 2000 Broadway Street, Menomonie, WI 54751. The business EIN is 27 1234567 and the principal business code for bookstores is 451211. During 2019, Amy had the following income and expenses: Sales of books Expenses Store rental Office expense Advertising City business license Payroll Payroll taxes Utilities Other Cost of inventory sold $321,000 16,000 6,000 11,700 1,020 83,550 8,400 8,050 3,000 185,000 Amy treats inventory as nonincidental materials and supplies. This year, Amy loaned a friend $10,000 so that he could make an investment. Instead of making the investment, the friend lost all the money gambling and left for parts unknown. Amy has no hope of ever collecting on this bad debt. Ken, who ordinarily never gambles, won $20,000 at a casino birthday party for one of his friends. The Booths provide the sole support for Ken’s parents, Rod (Social Security num ber 124809050) and Mary (Social Security number 489376676) Booth, who live in their own home. Ken and Amy live at 2345 Wilson Avenue, Menomonie, WI, 54751, and their Social Security numbers are 343753456 (Ken) and 123457890 (Amy). Ken and Amy can claim a $500 other dependent credit for each parent. Required: Complete the Booths’ federal income tax return for 2019 on Form 1040, Schedule 1, Schedule C, Schedule D, and Form 8949. A statement is required to be attached to a return for a nonbusiness bad debt, but this requirement may be ignored for this problem. Assume no 1099B is filed in association with the bad debt when filling out Form 8949.
