Amy treats inventory as non-incidental materials

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Reference no: EM133360096

Ken (birthdate July 1, 1987) and Amy (birthdate July 4, 1989) Booth have brought you the following information regarding their income, expenses, and withholding for the year. They are unsure which of these items must be used to calculate taxable income.

Income:
	Ken's salary (salesman)	$28,345
	Amy's wages (part-time nurse)	17,490
	Insurance reimbursement for repairs from an auto accident	500
	Gift from Uncle George	2,000
	Interest income from Lodge State Bank	833
Federal income taxes withheld:
	From Ken's salary	2,600
	From Amy's wages	650

Amy owns and operates a computer bookstore named "The Disk Drive." The store is located at 2000 Broadway Street, Menomonie, WI 54751. The business EIN is 27-1234567 and the principal business code for bookstores is 451211. During 2018, Amy had the following income and expenses:

Item	Amount
Sales of books
Expenses
	Store rental
	Office expense
	Advertising
	City business license
	Payroll
	Payroll taxes
	Utilities
	Other
Cost of inventory sold

Amy treats inventory as non-incidental materials and supplies.

This year, Amy loaned a friend $10,000 so that he could make an investment. Instead of making the investment, the friend lost all the money gambling and left for parts unknown. Amy has no hope of ever collecting on this bad debt.

Ken, who ordinarily never gambles, won $20,000 at a casino birthday party for one of his friends.

The Booths provide the sole support for Ken's parents, Rod (Social Security number 124-80-9050) and Mary (Social Security number 489-37-6676) Booth, who live in their own home. Ken and Amy live at 2345 Wilson Avenue, Menomonie, WI, 54751, and their Social Security numbers are 343-75-3456 (Ken) and 123-45-7890 (Amy).

Reference no: EM133360096

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