Comprehensive Problem $4-2$

Bes, an EIN, or inventory. e number on the lines $1$d$,3,$ a Ryan and Blake Lovely are married filing jointly with taxpayers. Ryan$$s birthdate is August $10,1983,$ and Social Security number is $434-14-4448.$ Blake$$s birthdate is March $19,1984,$ and their Social Security number is $763-16-1562.$ They live at $22$ Thornton Road, Nashua, NH $03063.$ Both are self$-$employed.

The Lovelys received the following statement from their brokerage account $($see separate tab$).$

The U$.$S$.$ Treasury interest is associated with bonds that also have market discount. The accrued market discount in $2023$ was $$47\mathrm{.}02.$ The Lovelys elect to recognize market discount in the year earned.

Blake started a new life coach business in $2023$ as a sole proprietor. The business office is located at $4$ Townsend W$,$ Suite $8,$ Nashua, NH $03063.$ The business code is $812990.$ The financial results are:

Line Item Description

Amount

Client revenue

$$5,000$

Office rent expense

$14,000$

Supplies

$1,000$

Utilities

$500$

Telephone

$400$

During $2023,$ Ryan invested in Vaporcoin, a virtual currency. He purchased $40$ units of Vaporcoin for $$3,000$ on February $2,2023.$ On May $15,2023,$ he exchanged the Vaporcoin into dollars when the value was $$3,500.$ He did not receive a $1099-$B from the Vaporcoin account.

Ryan also operates a small business teaching fitness classes in a park near their house. The business code is $812190.$ Ryan has a loyal clientele, and the books and records show the following:

Line Item Description

Amount

Exercise class receipts

$$5,000$

Exercise clothes

$1,000$

Various exercise supplies

$1,800$

The exercise clothes that Ryan purchased are not dissimilar to any other type of workout clothing.

Neither business has employees, an EIN, or inventory. Both businesses are accounted for using the cash basis of accounting.

Ryan and Blake own a rental property located at $52$ Charlotte Ave, Nashua, NH $03064.$ The condo was rented all year but is in need of an update. The condo$$s finances are as follows:

Line Item Description

Amount

Rent

$$8,000$

Interest

$10,000$

Property taxes

$4,000$

Utilities

$1,400$

Maintenance

$500$

Ryan and Blake made a $$500$ estimated payment on September $15,2023.$

Required:

Complete the Lovelys$$ federal tax return for $2023.$ Use Form $1040,$ Schedule $1,$ Schedule $2,$ Schedule B$,$ Schedule C $($two of them$),$ Schedule D$,$ Form $8949,$ Schedule E$,$ Schedule SE$,$ Form $8995,$ Form $8582($page $1$ only$)$ to complete this tax return. Also, to compute the Lovelys$$ net operating loss carryforward, prepare only Schedule A of Form $1045.$

Assume the taxpayers had health coverage for the entire year.

Neither taxpayers wants to contribute to the presidential election campaign.

If an amount box does not require an entry or the answer is zero, enter $"0."$

Do not round any percentages.

If required, round your answers to the nearest dollar.

If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.

Special Instructions for Schedule B $-$ In Part I for Interest, enter items from $1099$ in Box order first, then enter any other interest items.

If required, on Form $8582,$ use the minus sign to enter a "loss" as a negative number on the lines $1$d$,3,$ and $11.$ However, per the instructions on the tax return, enter all numbers in Part II as positive amounts.

he Lovelys received the following statement from their brokerage account:

$2023$ Combined Forms $1099$

This is important tax information and is being furnished to the IRS $($except as indicated$).$ If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.

Copy B for Recipient

OMB No$.1545-0110$

Pooled Investments

$40$ Wall Street, $24$th Floor

New York, NY $10005$

Account Number

Tax ID

Ryan and Blake Lovely

$22$ Thornton Road

Nashua, NH $03063$

$2345660009$

$***-**-4448$

Payer's Federal Tax ID

$32-9863145$

Financial Adviser$/$Phone

Monty Cook $888-555-1212$

Form $1099-$B

Proceeds from Broker and Barter Exchange Transactions

Box $6$: Gross Proceeds

Box $5$: Not checked

Box $3$: Basis reported to IRS

Box $2$: Type of Gain or Loss: Short$-$term

Box $1$ Security

description $($CUSIP$)$

Quantity sold

Box $1$b Date

acquired

Box $1$c Date sold

or disposed

Box $1$d

Proceeds

Box $1$e Cost or

other basis

Box $1$g Wash

sale loss

disallowed

Gain$/($Loss$)$

amount

Green Lantern Inc

$1,000$

$04/21/2018$

$03/22/2023$

$35,000$

$3,000$

$-$

$32,000$

Form $1099-$INT

Interest Income

Box $1$ Interest income

Box $2$ Early withdrawal penalty

Box $3$ i