Ken age 31 and Amy age 28 Booth have brought #775

Ken (age 31) and Amy (age 28) 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)................................................$27,200Amy's wages (part-time
nurse).........................................18,200Insurance reimbursement for repairs from an auto
accident............500Gift from Uncle George...................................................2,000Interest
income from Lodge State Bank..................................640Federal income taxes withheld:From
Ken's salary.........................................................1,200From Amy's
wages..........................................................650Amy owns and operates a computer bookstore
named ''The Disk Drive.'' The store is located at 2000 Park Ave, Bellview, ME 04104. During
2012, Amy had the following income and expenses:Sales of
books.......................................................$320,400ExpensesStore
rental..............................................................15,000Office expense..............................................
.............6,000Advertising.............................................................14,000City business license.......
.............................................1,000Payroll..................................................................89,000Payrol
l taxes.............................................................9,100Utilities............................................................
.......8,000Other.....................................................................3,000InventoryJanuary......................
........................................1 250,000December.........................................................31
235,000Purchases during the year..........................................165,000Last year was Amy's first
year of operating the bookstore. Amy and Ken elected to carry forward a $5,000 net operating
loss from the first year of business into 2012.This year, Amy loaned a friend $20,000 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 $25,000 at a casino birthday party for one of his friends. This
amount should be reported on the ''Other Income'' line of Form 1040.The Booths support Ken's
parents, Rod (Social Security number 124-80-9050)and Mary (Social Security number
489-37-6676) Booth, who live in their own home. Ken and Amy live at 2345 Park Ave, Bellview,
ME 04104, and their Social Security numbers are 343-75-3456 (Ken) and 123-45-7890
(Amy).Required:Complete the Booths' federal income tax return for 2012. Use Form 1040,
Schedule C, Schedule D, and Form 8949, on pages 3-49 to 3-56, and any other appropriate
schedule(s) you need to complete this tax return. A statement is required to be attached to a
return for a non business bad debt, but this requirement may be ignored for this problem.
Assume no 1099-B is filed in association with the bad debt when filling out Schedule D.View
Solution:
Ken age 31 and Amy age 28 Booth have brought

ANSWER
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