Dr. Computer Nerd earns $100,000 per year as a MIS professor. Mrs. Nerd earns $80,000 as a computer programmer. The Nerds earn $105,000 revenue per year in a computer consulting business they run out of their home (they have several charitable organizations as clients). The business takes the entire basement of the Nerd house. The Nerds give 10% of their revenue to charitable organizations and believe that their business has prospered as a partial result of the contributions. They use the payments to charitable organizations as part of their marketing strategy. They have federal withholdings of $40,000 and Georgia withholdings of $15,000. The 4 Nerdy children (ages 26, 19, 18, and 18) who all work in the business doing age-appropriate tasks. Lovely Nerd Grandchild (2 years old) also lives with the Nerds. Child care costs $4,000. Oldest Nerd is in college majoring in Computer Science and Accounting. Her tuition is $5,000, books cost $1,000, and a laptop computer cost $2,000. Mrs. Nerd does volunteer work at the church and helps Dr. Nerd in his consulting business. The Nerds earn a total of $3,000 interest per year ($1,000 of this amount is municipal bond interest).

Mrs. Nerds aunt wants to give Mrs. Nerd an apartment building that cost $50,000, but is worth $150,000. The aunt is in failing health and has a net worth of $250,000. The aunt gave Mrs. Nerd some stock a few years ago. The stock was sold this year at a gain of $140,000.

The Nerds purchased their home for $120,000 several years ago, but it appraised for $250,000 (the mortgages total $150,000). Interest on the mortgages is $6,000. Interest on other loans is $2,500. Real estate and personal property taxes total $2,500. Homeowners insurance costs $900 and utilities cost $4,000. Contributions to the church total $20,000 (in addition to the payments discussed previously). Basic telephone service costs $500 per year. Long distance charges total $600 (20% of this is business). The Nerds have a high-deductible health insurance plan that costs $5,000 (the deductible is $4,000) and have a $4,000 Health Savings Account. The Nerds spend $6,000 per year on normal medical expense, but all the little Nerds have crooked teeth. Braces will probably cost $10,000 over the next few years. Dr. Nerd has $3,000 interest on an educational loan, spends $1,000 on travel to MIS meetings, spends $200 on MIS association dues, purchased computer equipment costing $2,000, and spends $4,000 commuting to work. The Nerds set up a $6,000 Roth IRA.

REQUIRED: Prepare a tax return for the Nerds using 1040, Schedule A, Schedule C, Schedule SE