Problem - Fredrick (Freddy) Freeweights (age 42) owns and operates a health club called Treadmills West. The business is located at 4321 Arnold Street, Alpine, CA 91901. Freddy has the following income and expenses from the health club:
Income $214,900
Expenses: business insurance 3,800 Office supplies 3,335 payroll 97,200 payroll taxes 9,180 travel 2,420 entertainment and club maintenance $10,666 cleaning service 8,500 equipment rent 22,820 telephone 2,780 utilities 13,975 rent 30,000 advertising 4,750 special workout clothing and boxing gloves 750 subscription to Biceps Monthly Magazine 120 Educational Seminar on weight training 775 Other expenses 1,830.
The business uses the cash method of accounting and has no accounts receivable or inventory held for resale. Freddy has the following interest income for the year: Cuyamaca Bank savings account = 12,831 and Morgan Bank bond portfolio interest $10,825.
Freddy has been a widower for 10 years with a dependent son, Arnold (SS# 276-23-3954) and he files his tax return as head of household. Arnold is an 18-year-old highschool student; he does not qualify for the child credit. They live next door to the health club at 4323 Arnold St. Freddy does all the administrative work for the health club out of an office in his home. The room is 150 square feet and the house has a total of 1,800 square feet. Freddy pays 20,000 per year in rent and 4,000 in utilities. Freddy's social security number is 565-12-6789. He made an estimated tax payment to the IRS of $1,000 on April 15, 2014.
Required: Complete Freddy's federal tax return for 2014. Use the 1040, schedule B, Schedule C and form 8829 and any other appropriate schedules to complete this tax return. Make realistic assumptions about any missing data.