Kelly enjoys playing guitar and plays in a band. Kellys band has developed a local
following. This year, his gross revenues were $1,200 for playing shows and $700 on CD
sales. He incu
ed the following expenses:
Studio rent expense $1,300
Sound system repairs 200
CD production 500
New guitar and amplifier 800
Kelly's father passed away during the year. Kelly and Chanelle received $100,000 from
the life insurance policy. Neither Kelly nor Chanelle paid any of the premiums.
Chanelle purchased 100 shares of Thurston Co. stock on May 1, 1993, for $1,000.
Thurston Co. was declared bankrupt during the cu
ent year.
Chet’s physician recommended that he see a physical therapist to help with his dis-
ability. Kelly paid the therapist $7,000 during the year because his insurance would not
cover the bills.
Kelly and Chanelle went to Las Vegas and won $5,000 at the blackjack table. The next
night, they lost $6,000.
Kelly and Chanelle gave $900 to their church and, during the year, they had the fol-
lowing other income and expenses:
Real estate taxes $1,400
Property taxes on car (determined by value) 500
Home mortgage interest 9,000
Credit card finance charges 2,600
Tax return preparation fees ($600 is allocable to Chanelle’s business) 1,000
Sales tax on purchases during the year 6,200
Interest from a savings account 800
Interest from City of Boston Bonds 700
Dividend from 3M stock 400
Prepare Kelly and Chanelle’s tax return Form 1040 and Schedules A, B, C, D, and SE
for 2021. Assume the couple had no transactions involving virtual cu
ency.
Kelly and Chanelle Chambers, ages 47 and 45, are ma
ied and live at 584 Thoreau Drive,
Boston, MA XXXXXXXXXXKelly's Social Security number is XXXXXXXXXXand Chanelle’s is 222-
XXXXXXXXXXThe Chambers have two children: Emma, age 23, and Chet, age 19. Their Social
Security numbers are XXXXXXXXXXand XXXXXXXXXX, respectively. Emma is a single
college student and earned $8,000 during the summer. Kelly and Chanelle help Emma
through school by paying for her room, board, and tuition. Emma lives at home during
the summer. Chet has a physical handicap and lives at home. He attends a local university
and earned $4,000 working for a marketing firm. In sum, Kelly and Chanelle provide
more than 50% of both Emma’s and Chet’s total support for the year.
Kelly is a commercial pilot for a small airline. His salary is $95,000, from which
$19,000 of federal income tax and $8,000 of state income tax were withheld. Kelly also
pays premiums for health, disability, and life insurance. $2,000 of the premium was fo
health insurance, $250 for disability, and $400 for life insurance.
Chanelle owns Alliance Networks, a proprietorship that does network consulting.
During the year, Chanelle’s gross revenues were $23,000. She incu
ed the following ex-
penses in her business:
Liability insurance $ 700
Software rental 5,400
Journals and magazines 150
Training seminars 1,200
Supplies 1,300
Donations to a political campaign fund 800