solve problem 1

PROBLEM 1-INDIVIDUALS (FORM 1040) Jason R. and Jenni L. Dane are married and live at 13071 Sterling Drive, Marquette, MI 49866. Jason is a self-employed insurance claims adjuster (business activity code 524290), and Jenni is the dietitian for the local school district. They choose to file a joint tax return each year 1. Jason represents several national casualty insurance companies on a contract basis He operates this business on the cash basis. He is paid a retainer and receives additional compensation if the claims he processes for the year exceed a specified number. As an independent contractor, he is responsible for whatever expenses he incurs. Jason works out of an office near his home. The office is located at 1202 Moose Road. He shares Suite 326 with a financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the landlord. Jason paid his one- half share of the 2018 expenses as detailed below Office rent $11,600 Utilities (includes telephone and fax) Replacement of waiting room furniture on April 22 Renters'insurance (covers personal liability, casualty, theft) Office expense (supplies, postage) New Toshiba copier on February 7 4,300 3,600 1,400 740 300 Waiting room coffee service (catered) Waiting room magazine subscriptions 280 90 For his own business use, Jason purchased a $2,100 laptop computer on June 17 and a $1,200 Nikon camera on February 5. Except for his vehicle (see item 2 below), Jason uses the 179 write-off option whenever possible. Jason has no expenditures for which he is required to file Form 1099s. 2. On January 2, 2018, Jason paid $31,000 (including sales tax) to purchase a gently used Toyota Camry that he uses 92% of the time for business. No trade-in was involved, and he did not claim any 179 expensing. Jason uses the actual operating -1 cost method to compute his tax deduction. He clects to use the 200% doclining balance MACKS deprectation method with a half year covention. His expenses rcating to the Camry for 2018 are as follows was limiled to his Medicare coverage because the Danes's medical insurance (see inem 3 ahore) only covered Jason, Jenni, and their sons. Jesse's will named Jenni as executor and sole beir of his estate. 6 One ol the assets Jeni inheriled with the transfer of Jesse's estale was his bouse. Upoa he advice of the financial consultan who sares ollce space with. ason, the Danes decided to convert Jesse's home into a furnished rental house. After Gasolne 53,500 1,00 Aut imurance Inerest on car loan 820 Aut bds 0l changes and lubrication License and gisation 325 several minoe repairs (eg, touching up the paint on the interior wals, replacing varicus window screens, pressure washing the brick exterior, etc), the pruperty was advertised for rent in the classified section of the lcal newspaper on March 1, 2018 The repairs cost $720, and the newspaper ad was $360. Based on reconstracted reords and appraisal estimstes, infomation about the property is as folows 210 190 n canection with his business use of the Camry, Jason paid $510 for tolls and $350 in fines for traffic violations. In 2018, Jason drove the Camry 14,532 miles for business and 1,249 miles for persunal use (which includes his daily, round-trip commute to work) Original Cost EMY 1/8/18 3. Jason handes most claim applications locally, but on occasion he must travel out of town. Expenses in connection with these business trips during 2018 were $930 for lodging and $1, 140 for meals. He also paid $610 for business dinners he had with several visiting executives of insurance companies wth whom he does business Jasun's other business-related expenses for 2018 are listed below House 540000 $220000 Land 10000 S0000 Fumiture and epplances 21,000 14000 7. Jesse's fomer residence was reated almos imediately with occupancy Commencing April 1, 2018, under the following terms: one year lease, $2,400 per moh due the first day of the month, first and last months' rent in advance, $2,000 damage depost, lawn care included but not utilities. The tenant complied with all terms except that the December rent payment was not made until January 1, 2019 because the tenant took an extended holiday trip that started on Thanksgiving Day November 22) through Christmas Day (December 25). Expenses in connection wth the property were as follows property taxes, $2,600 repairs, $320 1 maintenance, $540; insurance, $1,800, and street paving assessment, $2,100. The property is located at 12120 lake Road, Harvey, MI 49855 & In ealy December 2017, a friend acvised Jason to buy sock in Pioneer Aviation Inc. PAID. At that time, PAI was in serious financial straits and was headed toward Contrbutlon to HR 10Keoghl retirement plan Premiums on medical insurance covering self and family spouse and children 58,000 4,600 Premiums on disabilty insurance policy pays for lass of income in the event Jason is disabled and cannot work) State and local occupetion fee Brthday gi foreceptionist (525 bex of Godva chocalates plus $3 for gift wrap) 2400 450 28 4. Jenni earrs $32,000 working as a registered dietician for the Marquette Public School District The job she holds, manager of the school lunch program, is noc classified as full time. Consequendly, she is not eligible to participate in the teacher retirement or health insurance programs. Jennis expenses for 2018 are summarized as follows bankruptcy. Neverheless, according to Jason's friend, the value of the corporation's underlying assets was such that the sharehalders were bound to recover considerably more than the curent market price of $50 per share. Excited at the chance for a sure profit, on December 15, 2017,Jason purchased 20,000 shares for $10,000. In September 2018, the trustee in bankruptcy announced that the stock was worthless and that even some af PAI's preferresd creditors would not he paid. Contributlon to trad tional RA 55,500 Jeb huning espens Continung uEon prmgram Membership dues to the National Assoclation of Dietitans Subscription to Nuihon Tay 720 350 120 90 9. On June 14, 2018, the Danes sod 500 shares of Garnet Corporation for $17,500 $35 per share) They owned 1,000 shares, acquired as follows 500 shares on November 5, 2017, foe $25 a ahare and 7 shares on April 5, 2018, for $30 a share The Danes did nat instruct their broker as to which shares to sell, so Form 1099-B for this sale reported a $12,500 basis for these shares 10. One oh before she died on April 14, 2008, Susan Voss Jenni's mother) gave Jenni a coin collection. Based on careful records that Susan kept, the collection had a cost basis of $9,000 and a fair market value of $18,000 at the time Susan Lnorder to work full time and eam a larger salary, Jenni applied for a position s chief dietitian for a chain of nuraine bomes ACConding to the director of the rearuting service she hired, the postion has not yet been filled, and Jenni is ane of be leading candidates. The coatinuing education program was sponsoned by the Narkonal Association of Deritians and consisted of a one-day seminar on speclal des Sor seniors. Jenni drove the family Chevrulet Malibu 930 miles on job-related 1se and 5,200 miles in commuting to wnek, out of a total of 8,670 miles driven for he year. The Danes purchased the car on July 11, 2016, for $23,400. Jenni uses the automaric mileage method for computing any availahle decduction for husiness use of the car passed away. On Febniary 12, 2018, the Dane residence was hurglarized and the con collecticn was stoln. The Danes filed a caim with the carier of their . The Danes have suppoted Jesse Voss Jenn's widowed father) far seveal years, appropriately claiming him as a dkpendent for tax purposes. On December 27, 2017, Jesse suffered a massive stroke. The doctors did everything they could for Jesse, hut he died in the intensive care unlt of Riverwood Haspital on Jamuary 8, 2018. n January ard February of 2018, the Danes paid the following bills on behalf of Jesse: medical expenses of $11,900 not covered by Medicare ($6,00 incurred in 2017 and $5,800 in 2018) and funeral expenses of $15,300. Jesse's heahth insurance homewers insurance policy for $24,000 (the curent value of the collection). Unfortunately, they were only able to collect $10,000, which was the maximum payout allowed for valuables (eg., jewelry, antiques) without a special rider atached to the insurance policy 11. In her will, Susan Vss (see item 1left Jenni a vacart lo on Wright Street Susan had paid $15.000 for the property, and r had a value of $19,000 when she died. Susan had purchased the lot because it was adjacent to Northern Michigan University property and she cxpected the school to cventually cxpand the campus By 2018, it has become clear that the University docs not have the funds to cxpand the campus. Consequently, on July 1, 2018, Jenni sold the lot for $19,000. Not included in this price are unpaid property taxes (and interest on the unpaid taxes) of $700 on the lot, which the purchaser assumed and later paid. Form 1099-B did not rcport the basis of this property 12. Every year around Christrmas, Jason receives cards from various car repair facilities (including dealerships), expressing thanks for the business referrals and enclosing cash. Jason has no arangement, contractual or otherwise, that requires any compensation for the referrals he makes. Concerned about the leality of such gifts" Jasn consulted an attorney about the matter a few years ago. Without passing judgment on the status of the payors, the attomey found that Jason's acceptance af the payments does not violate state or local laws. Jason sincerely believes that the payments he receives have no effect on the referrals he makes. During December 2018, Jascn received cards containing $7,200. One additional card containing $900 was delayed in the mail and was not received by Jason until January 4, 2019 13. In addition to those previously noted, the Danes's receipts during 2018 are summarized below. 16. The Danes have two sons who live with them Ethan and Isaac. Both are full-time students. Ethan s an accomplished singcr and cancd $4,200 during the ycar performing at spccial events (c.g, weddings, anniversarics, civic functions). Ethan deposlts his carnings in a savings account intended to help cover future college expenses. Isaac does not have a job 17. The Form W-2 Jenni receives from her employer reflects wages of $32,000 Appropriate amounts for Social Security and Mecdicare taxes were dechuctecd. Income tax withholdings were $1,320 for Federal and $1,056 for state. The Danes made quarterly tax payments of $1,900 far Federal and $600 for state on each of the following dates: April 10, 2018 June 11, 2018, September 10, 2018, and December 28, 2018. None of the Danes hold any foreign financial accounts. Relevant Social Security numbers are noted helew Name Social Security Number Birth Date Jason R.Dane- 06/06/1976 111-11-1111 Jenni L Dane 123-45-6781 08/14/1977 Jesse S. Voss 123-45-6784 03/12/1938 123-45-6788 Ethan T. Dene 09/13/2001 Isaac S. Dane 07/20/2003 123-45-6789 Payments to Jason for services rendered (as reported on Forms 1099-MISC issued by several payor insurance companies) pursuant to contractual arrangement Income tax refunds for tax year 2017 Requirements Prepare an income tax retun (with all appropriate forms and schedules) for the Danes for 2018 following these guidelines Make necessary assumptions for information not given in the problem but needed to complete the return The taxpayers are preparing their own return (ie., no preparer is involved). S84800 Federal 210 State of Michigan Interest income (reported on separate Forms 1099-INT) State of Michigan general-purpose bonds 90 1400 General Electric corporate bonds 1,100 The taxpayers have substantiation (e.g., records, receipts) to support all transactions for the year If any refund is due, the Danes want a refund check sent to them by mail Certificate of deposit at Marquette National Bank Qualified dividends (Krist Energy, reported on Form 1099-DIV) 900 1,200 Proceeds from garage sale (see item 14 below) Cash gifts fram Jasan's parents Jason's net state lottery losses ($1.000 of winnings reported on 9,200 The Danes had itemized deductions from AGI for 2017 of $16,700, of which $1,500 was for state and local income taxes 24,000 Form W2-G; $2300 of losses) (1300 The Danes do not want to contribute to the Presidential Election Campaign Fund. 14. On June 7 and 8, 2018, the Danes held a garage sale to dispose of unwanted funiture, appliances, books, bicycles, clothes, and one boat (including trailer). The estimated basis of the items sold is $25,500. All assets were used by the Danes for personal purposes 15. Payments made for 2018 expenditures not mentioned elsewhere are as follows: PROBLEM 2-INDIVIDUALS (FORM 1040) Andrew (Andy) S. and Sarah H. Clark are husband and wife and live at 4112 Foxglove Drive, McKinney, TX 75070. Andy is a retired petroleum engineer, and Sarah is a portrait artist. They choose to file a joint tax return each year 1. When he retired at age 65, Andy was chicf of offshorc opcrations at Pelican Exploration Corporation While employed, Andy participated in Pelican's contributory qualifhed pension plan, to which he had contributed $250,000 (in after-tax dollars). Under one of the plan options, he chose a life-annuity payout of $60,000 per year over his life. As part of his retirement package, Andy also received nontaxable health insurance coverage for him and Sarah. Due to Andy's cxpertisc in Gulf of Mexico offshore opcrations, Pelican continues to use his services on a consulting basis (see item 3 below). 2. Sarah, an accomplished artist, is well known regionally for oil portraits (business activity code 711510). She paints in the Photorealism style, providing her clients Medical: Copayment partion of medical expenses Dental (crthodontist) $1,300 1,200 s State income tax (see item 17 below) 3,456 State sales taxes 1,120 Property taxes on personal residence 3,800 Interest on hame mortgage reported on Form 1098 Charitable contributions 4,200 3,600 The Danes's medical insurance does not cover dental services. The Danes pledge contributions of $1,200 per year to their church, The Water's Edlge Church in Marque, Michipan. In 2018, they paid the pledges for 2017 through 2019. During 2018, the Danes drove the Malibu 270 miles for medical purposes (e.g, trips to the hospital, dactor and dentist offices) and 320 miles delivering meals to the poor for Meals-on-Wheels, a qualified charity with prais that are often mistaken fer photoraphs. Painting in this style is very timc-consuming. Conscquenly, her output averages between 15 and 16 portraits a year. Her fee of $3,200 per portrait was set several years ago and never varies. As this is quite reasonable for a Photorealistic ol portrait, she has a long waiting list PROBLEM 1-INDIVIDUALS (FORM 1040) Jason R. and Jenni L. Dane are married and live at 13071 Sterling Drive, Marquette, MI 49866. Jason is a self-employed insurance claims adjuster (business activity code 524290), and Jenni is the dietitian for the local school district. They choose to file a joint tax return each year 1. Jason represents several national casualty insurance companies on a contract basis He operates this business on the cash basis. He is paid a retainer and receives additional compensation if the claims he processes for the year exceed a specified number. As an independent contractor, he is responsible for whatever expenses he incurs. Jason works out of an office near his home. The office is located at 1202 Moose Road. He shares Suite 326 with a financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the landlord. Jason paid his one- half share of the 2018 expenses as detailed below Office rent $11,600 Utilities (includes telephone and fax) Replacement of waiting room furniture on April 22 Renters'insurance (covers personal liability, casualty, theft) Office expense (supplies, postage) New Toshiba copier on February 7 4,300 3,600 1,400 740 300 Waiting room coffee service (catered) Waiting room magazine subscriptions 280 90 For his own business use, Jason purchased a $2,100 laptop computer on June 17 and a $1,200 Nikon camera on February 5. Except for his vehicle (see item 2 below), Jason uses the 179 write-off option whenever possible. Jason has no expenditures for which he is required to file Form 1099s. 2. On January 2, 2018, Jason paid $31,000 (including sales tax) to purchase a gently used Toyota Camry that he uses 92% of the time for business. No trade-in was involved, and he did not claim any 179 expensing. Jason uses the actual operating -1 cost method to compute his tax deduction. He clects to use the 200% doclining balance MACKS deprectation method with a half year covention. His expenses rcating to the Camry for 2018 are as follows was limiled to his Medicare coverage because the Danes's medical insurance (see inem 3 ahore) only covered Jason, Jenni, and their sons. Jesse's will named Jenni as executor and sole beir of his estate. 6 One ol the assets Jeni inheriled with the transfer of Jesse's estale was his bouse. Upoa he advice of the financial consultan who sares ollce space with. ason, the Danes decided to convert Jesse's home into a furnished rental house. After Gasolne 53,500 1,00 Aut imurance Inerest on car loan 820 Aut bds 0l changes and lubrication License and gisation 325 several minoe repairs (eg, touching up the paint on the interior wals, replacing varicus window screens, pressure washing the brick exterior, etc), the pruperty was advertised for rent in the classified section of the lcal newspaper on March 1, 2018 The repairs cost $720, and the newspaper ad was $360. Based on reconstracted reords and appraisal estimstes, infomation about the property is as folows 210 190 n canection with his business use of the Camry, Jason paid $510 for tolls and $350 in fines for traffic violations. In 2018, Jason drove the Camry 14,532 miles for business and 1,249 miles for persunal use (which includes his daily, round-trip commute to work) Original Cost EMY 1/8/18 3. Jason handes most claim applications locally, but on occasion he must travel out of town. Expenses in connection with these business trips during 2018 were $930 for lodging and $1, 140 for meals. He also paid $610 for business dinners he had with several visiting executives of insurance companies wth whom he does business Jasun's other business-related expenses for 2018 are listed below House 540000 $220000 Land 10000 S0000 Fumiture and epplances 21,000 14000 7. Jesse's fomer residence was reated almos imediately with occupancy Commencing April 1, 2018, under the following terms: one year lease, $2,400 per moh due the first day of the month, first and last months' rent in advance, $2,000 damage depost, lawn care included but not utilities. The tenant complied with all terms except that the December rent payment was not made until January 1, 2019 because the tenant took an extended holiday trip that started on Thanksgiving Day November 22) through Christmas Day (December 25). Expenses in connection wth the property were as follows property taxes, $2,600 repairs, $320 1 maintenance, $540; insurance, $1,800, and street paving assessment, $2,100. The property is located at 12120 lake Road, Harvey, MI 49855 & In ealy December 2017, a friend acvised Jason to buy sock in Pioneer Aviation Inc. PAID. At that time, PAI was in serious financial straits and was headed toward Contrbutlon to HR 10Keoghl retirement plan Premiums on medical insurance covering self and family spouse and children 58,000 4,600 Premiums on disabilty insurance policy pays for lass of income in the event Jason is disabled and cannot work) State and local occupetion fee Brthday gi foreceptionist (525 bex of Godva chocalates plus $3 for gift wrap) 2400 450 28 4. Jenni earrs $32,000 working as a registered dietician for the Marquette Public School District The job she holds, manager of the school lunch program, is noc classified as full time. Consequendly, she is not eligible to participate in the teacher retirement or health insurance programs. Jennis expenses for 2018 are summarized as follows bankruptcy. Neverheless, according to Jason's friend, the value of the corporation's underlying assets was such that the sharehalders were bound to recover considerably more than the curent market price of $50 per share. Excited at the chance for a sure profit, on December 15, 2017,Jason purchased 20,000 shares for $10,000. In September 2018, the trustee in bankruptcy announced that the stock was worthless and that even some af PAI's preferresd creditors would not he paid. Contributlon to trad tional RA 55,500 Jeb huning espens Continung uEon prmgram Membership dues to the National Assoclation of Dietitans Subscription to Nuihon Tay 720 350 120 90 9. On June 14, 2018, the Danes sod 500 shares of Garnet Corporation for $17,500 $35 per share) They owned 1,000 shares, acquired as follows 500 shares on November 5, 2017, foe $25 a ahare and 7 shares on April 5, 2018, for $30 a share The Danes did nat instruct their broker as to which shares to sell, so Form 1099-B for this sale reported a $12,500 basis for these shares 10. One oh before she died on April 14, 2008, Susan Voss Jenni's mother) gave Jenni a coin collection. Based on careful records that Susan kept, the collection had a cost basis of $9,000 and a fair market value of $18,000 at the time Susan Lnorder to work full time and eam a larger salary, Jenni applied for a position s chief dietitian for a chain of nuraine bomes ACConding to the director of the rearuting service she hired, the postion has not yet been filled, and Jenni is ane of be leading candidates. The coatinuing education program was sponsoned by the Narkonal Association of Deritians and consisted of a one-day seminar on speclal des Sor seniors. Jenni drove the family Chevrulet Malibu 930 miles on job-related 1se and 5,200 miles in commuting to wnek, out of a total of 8,670 miles driven for he year. The Danes purchased the car on July 11, 2016, for $23,400. Jenni uses the automaric mileage method for computing any availahle decduction for husiness use of the car passed away. On Febniary 12, 2018, the Dane residence was hurglarized and the con collecticn was stoln. The Danes filed a caim with the carier of their . The Danes have suppoted Jesse Voss Jenn's widowed father) far seveal years, appropriately claiming him as a dkpendent for tax purposes. On December 27, 2017, Jesse suffered a massive stroke. The doctors did everything they could for Jesse, hut he died in the intensive care unlt of Riverwood Haspital on Jamuary 8, 2018. n January ard February of 2018, the Danes paid the following bills on behalf of Jesse: medical expenses of $11,900 not covered by Medicare ($6,00 incurred in 2017 and $5,800 in 2018) and funeral expenses of $15,300. Jesse's heahth insurance homewers insurance policy for $24,000 (the curent value of the collection). Unfortunately, they were only able to collect $10,000, which was the maximum payout allowed for valuables (eg., jewelry, antiques) without a special rider atached to the insurance policy 11. In her will, Susan Vss (see item 1left Jenni a vacart lo on Wright Street Susan had paid $15.000 for the property, and r had a value of $19,000 when she died. Susan had purchased the lot because it was adjacent to Northern Michigan University property and she cxpected the school to cventually cxpand the campus By 2018, it has become clear that the University docs not have the funds to cxpand the campus. Consequently, on July 1, 2018, Jenni sold the lot for $19,000. Not included in this price are unpaid property taxes (and interest on the unpaid taxes) of $700 on the lot, which the purchaser assumed and later paid. Form 1099-B did not rcport the basis of this property 12. Every year around Christrmas, Jason receives cards from various car repair facilities (including dealerships), expressing thanks for the business referrals and enclosing cash. Jason has no arangement, contractual or otherwise, that requires any compensation for the referrals he makes. Concerned about the leality of such gifts" Jasn consulted an attorney about the matter a few years ago. Without passing judgment on the status of the payors, the attomey found that Jason's acceptance af the payments does not violate state or local laws. Jason sincerely believes that the payments he receives have no effect on the referrals he makes. During December 2018, Jascn received cards containing $7,200. One additional card containing $900 was delayed in the mail and was not received by Jason until January 4, 2019 13. In addition to those previously noted, the Danes's receipts during 2018 are summarized below. 16. The Danes have two sons who live with them Ethan and Isaac. Both are full-time students. Ethan s an accomplished singcr and cancd $4,200 during the ycar performing at spccial events (c.g, weddings, anniversarics, civic functions). Ethan deposlts his carnings in a savings account intended to help cover future college expenses. Isaac does not have a job 17. The Form W-2 Jenni receives from her employer reflects wages of $32,000 Appropriate amounts for Social Security and Mecdicare taxes were dechuctecd. Income tax withholdings were $1,320 for Federal and $1,056 for state. The Danes made quarterly tax payments of $1,900 far Federal and $600 for state on each of the following dates: April 10, 2018 June 11, 2018, September 10, 2018, and December 28, 2018. None of the Danes hold any foreign financial accounts. Relevant Social Security numbers are noted helew Name Social Security Number Birth Date Jason R.Dane- 06/06/1976 111-11-1111 Jenni L Dane 123-45-6781 08/14/1977 Jesse S. Voss 123-45-6784 03/12/1938 123-45-6788 Ethan T. Dene 09/13/2001 Isaac S. Dane 07/20/2003 123-45-6789 Payments to Jason for services rendered (as reported on Forms 1099-MISC issued by several payor insurance companies) pursuant to contractual arrangement Income tax refunds for tax year 2017 Requirements Prepare an income tax retun (with all appropriate forms and schedules) for the Danes for 2018 following these guidelines Make necessary assumptions for information not given in the problem but needed to complete the return The taxpayers are preparing their own return (ie., no preparer is involved). S84800 Federal 210 State of Michigan Interest income (reported on separate Forms 1099-INT) State of Michigan general-purpose bonds 90 1400 General Electric corporate bonds 1,100 The taxpayers have substantiation (e.g., records, receipts) to support all transactions for the year If any refund is due, the Danes want a refund check sent to them by mail Certificate of deposit at Marquette National Bank Qualified dividends (Krist Energy, reported on Form 1099-DIV) 900 1,200 Proceeds from garage sale (see item 14 below) Cash gifts fram Jasan's parents Jason's net state lottery losses ($1.000 of winnings reported on 9,200 The Danes had itemized deductions from AGI for 2017 of $16,700, of which $1,500 was for state and local income taxes 24,000 Form W2-G; $2300 of losses) (1300 The Danes do not want to contribute to the Presidential Election Campaign Fund. 14. On June 7 and 8, 2018, the Danes held a garage sale to dispose of unwanted funiture, appliances, books, bicycles, clothes, and one boat (including trailer). The estimated basis of the items sold is $25,500. All assets were used by the Danes for personal purposes 15. Payments made for 2018 expenditures not mentioned elsewhere are as follows: PROBLEM 2-INDIVIDUALS (FORM 1040) Andrew (Andy) S. and Sarah H. Clark are husband and wife and live at 4112 Foxglove Drive, McKinney, TX 75070. Andy is a retired petroleum engineer, and Sarah is a portrait artist. They choose to file a joint tax return each year 1. When he retired at age 65, Andy was chicf of offshorc opcrations at Pelican Exploration Corporation While employed, Andy participated in Pelican's contributory qualifhed pension plan, to which he had contributed $250,000 (in after-tax dollars). Under one of the plan options, he chose a life-annuity payout of $60,000 per year over his life. As part of his retirement package, Andy also received nontaxable health insurance coverage for him and Sarah. Due to Andy's cxpertisc in Gulf of Mexico offshore opcrations, Pelican continues to use his services on a consulting basis (see item 3 below). 2. Sarah, an accomplished artist, is well known regionally for oil portraits (business activity code 711510). She paints in the Photorealism style, providing her clients Medical: Copayment partion of medical expenses Dental (crthodontist) $1,300 1,200 s State income tax (see item 17 below) 3,456 State sales taxes 1,120 Property taxes on personal residence 3,800 Interest on hame mortgage reported on Form 1098 Charitable contributions 4,200 3,600 The Danes's medical insurance does not cover dental services. The Danes pledge contributions of $1,200 per year to their church, The Water's Edlge Church in Marque, Michipan. In 2018, they paid the pledges for 2017 through 2019. During 2018, the Danes drove the Malibu 270 miles for medical purposes (e.g, trips to the hospital, dactor and dentist offices) and 320 miles delivering meals to the poor for Meals-on-Wheels, a qualified charity with prais that are often mistaken fer photoraphs. Painting in this style is very timc-consuming. Conscquenly, her output averages between 15 and 16 portraits a year. Her fee of $3,200 per portrait was set several years ago and never varies. As this is quite reasonable for a Photorealistic ol portrait, she has a long waiting list