John and Ellen Brite are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail store, Brite-On. Brite-On had the following assets on January 2, 2013:
Assets Cost
Old store building purchased April 1, 2002 200,000
Land $40,000
Equipment (7-year recovery) purchased January 10, 2008 55,000
Inventory valued using FIFO method:
Old inventory: 40,000 light bulbs $4/bulb
Newest 50000 5
Brite-On purchased a competitor's store on March 1, 2013 for $225,000. The purchase price included the following:
New store building $161000(FMV)
Land 50000 (FMV)
Equipment (5-year recovery) 30,000 (FMV)
Inventory: 5,000 light bulbs $7/bulb (cost)
On June 30, 2013, Brite-On sold the 7-year recovery period equipment for $20,000. Brite-On sold 60,000 light bulbs at a price of $12/bulb during the year.
Brite-On had the following revenues
Service revenues $45,000
Interest expense on business loans 7950
Operating expense 18795
Taxes and licenses 15575
Utilities 29600
John and Ellen also had some personal expenses:
Medical bills $ 6600
Real property taxes 9300
Home mortgage interest 123,00
Charitable contributions (cash) 5300
married jointly, calculate tax return