Complete Schedule C (and all other necessary forms for Schedule C) and SE for Karen.

Karen Ellis (age 37, DOB: 3/26/78, SSN 412-00-5678) single, owns and operates a day care for children out of her home. She lives at 5183 Lost Alley, Your City, Your State - Your Zip. Karen does not have an Employer ID#. Her business uses the cash method of accounting and has no inventory. Karen started her day care on January 1, 2015; it is open five days a week from 8:30 AM to 5:30 PM all year. (Use 260 days for the year.)

Her house is valued at $170,000, which includes land value of $10,000. The total area of her house is 2,000 square feet, and she uses the whole house for the day care.

Gross receipts: $32,400

Expenses:

Electricity $2,270 Advertising $50

Toys $475 Water $436

Home insurance (rider) $509 Mortgage interest $7,255

Real estate tax $1,675 Repairs (damage by child) $275

Business license $100 Meals for the children $4,050

Home Owners Insurance $535 Paint entire house (inside & out) $2,245

Car loan interest $600 Personal property tax on car $280

Karen drove 4,297 business miles. During the year Karen drove 9,555 total miles. The car was purchased 1/02/15 at the cost of $15,000. She paid $52 for tolls. She kept a written logbook. She has no other vehicle. Karen wishes to use the standard mileage rate for her car expenses.

Karen took the children to the park, zoo, movies, etc. Throughout the year, she spent $434 for movie tickets and $24 for animal feed at the zoo.

Karen is required to attend a seminar each year for pediatric first-aid and CPR training in order to maintain her state license as a daycare operator. She attended in March and spent $250 for the seminar.

What happens to the portion of the mortgage interest, real estate tax, and home