It was a storybook marriage. Rich and Laura Jones were married at the Bellagio in Las Vegas on New Year's Day, January 1, 2020. They said their vows before sunset and celebrated into the night. Laura and Rich welcomed a baby girl, Breck (SSN 422-76-2468), into the world on December 15, 2020. Rich and Laura live at 577 Beach Rd., Seaside, VA 32459 telephone 850-999-1234. The Jones requested that you prepare their 2020 federal tax return, including all necessary forms and schedules. Any additional calculations should be submitted and kept in their file.  

The following information was provided by the couple. Do not complete state tax return(s).

Laura (SSN 234-87-6523) Jones is an accountant for Seaside Tax, Inc.. In 2020, she received a base salary of $95,000 from which Seaside Tax withheld $19,000 for federal income tax; $5,890 in social security tax; and $1,377.5 in Medicare tax. Seaside's federal ID number is 68-4528536 and address of record is 1212 Palm Drive, Seaside, VA 32459. Seaside Tax provides health insurance for Laura. Rich is allowed to participate in the plan but chooses not to. Laura adds Breck to her insurance plan. Her W-2 is included in the tax package. Rich (SSN 432-43-2534) Jones works as a charter fisherman in Seaside. In 2020 he collected $200,000 from customers for charter fees. He paid 100,000 for his boat three years ago (1/15/2017) and has depreciated it using the MACRS 200% method. Expenses he incurred operating his fishing boat were:

• Gas: $40,000

• Crew Salary: $35,000

• Boat Maintenance: $15,000

• Bait: $5,000

• Boat Insurance: $5,000

• Beer and ice for customers: $1,000

• Beer for captain and crew: $2,500 (not deductible? Or would it be under entertainment as compensation?)

• Business Tax and License: $1,000

Rich also received $20,000 in tips from happy customers, which he split evenly with his crewmember Mack. Sometimes customers could not take all of the fish they caught home, in which case Rich sold the fish to local restaurants. Sales of the fish totaled $16,000. Rich was not sure how much tax he owed on his income and was even more confused by the self-employment tax. He decided to make a payment of $30,000 on June 15, 2020 for the entire year and hoped it was enough. A copy of Form 1040-ES is included in the tax package. Since gambling is legal in Vegas, and it was Rich and Laura's wedding celebration, they tried their hand at poker. Before the night of gambling was over, Rich had lost $14,000 and Laura had won $12,000. The casino gave her a check for her winnings less 20% withholding; Laura's check was for $9,600 (withholding for federal income tax was $2,400). Laura’s W-2G is included in their tax package. Rich pays 100% of the cost of his mother’s retirement home. Mindy Jones (SS#234-12-5678) has social security income of $2,000 each year. All meals and entertainment are included in the cost of the home. Rich purchased stock in Apple on May 22, 2019. He purchased 20 shares at $132.54 per share. They held that stock until December 12, 2020, when they sold 20 shares at $113.30 per share. On June 10, 2020 Rich sold 100 shares of IBM stock, at $152.37 per share that he originally purchased in 2000 for $7,500 (100 shares at $75). Rich did not receive a 1099-B for the stock transactions. Rich received $500 in qualified dividends prior to the sale of his stock. A 1099-DIV is included in the tax package. Rich also received $400 in interest from his Publix bonds. Laura sold 10 shares at $108.97 per share of Facebook stock on June 27, 2020 that she purchased at the IPO on May 17, 2014 for $38 per share. Laura did not receive a 1099-B for the stock transactions. Laura also owned stock that appreciated in value by $13,000 during the year, but she did not sell any of this stock. Laura received $1,200 in qualified dividends on the stock she owns. A 1099-DIV is included in the tax package. Laura also received $600 in interest from her Town of Seaside bonds. Laura immediately moved in with Rich after the wedding. Her moving expenses were $1,345. She had previously lived down the street from Rich in a condo overlooking the beach. She decided to keep the condo and rent it out. She collected $2,000 a month in rent for March through December. At the time she started renting her condo, her basis in the condo was $200,000. Her expenses associated with the condo were:

• Maintenance fees: $600

• Homeowner association dues: $600

• Mortgage Interest: $1,500

• Property Tax: $500

Other itemized expenses they incurred are as follows:

1. Cash contributions to their church, $1,000

2. Cash contribution to Virginia Tech, $8,000, of this amount $5,000 was for the right to purchase tickets for the 2020 football season

3. Student loan interest of $4,000 related to their student loan indebtedness from attending Virginia Tech University from 2011-2015. The loan proceeds were used for

uition and fees.

4. Contribution of Google stock to Seaside Animal Shelter, cost of $500, FMV of $2,500

5. Contribution to the Seaside Animal Shelter of used furniture that cost $3,500 and had an FMV of $800 according to the Appraisal Company. The shelter home is a

6. 501(c)(3) corporation.

7. Rich computes that they have paid $6,800 in general sales taxes during the year.