Alice J. and Bruce M. Jones are married taxpayers who file a joint return. Alice’s birthday is…

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Alice J. and Bruce M. Jones are married taxpayers who file a joint return. Alice’s birthday is September 21, 1961, and Bruce’s is June 27, 1960. Bruce is the office manager for Ames Dental Clinic. Alice is the CPA at Lehman, York & Hunter CPA, LP. The Jones provide over half of the support of their two children, Cynthia (born January 25, 1994, Social Security number (017-44-9126) and John (born February 7, 1995, Social Security number (017-27-4148), who live with them. Both children are full-time students and live with the Jones except when they are away at college. Cynthia is in her third year of college, and earned $8,750 from a summer internship in 2019, and John is in his first year of college and he earned $6,500 from a part-time job in 2019. In 2019, the Jones’ paid $4,500 for Cynthia’s college tuition and $7,500 for John’s college tuition. The Jones also provided all the support for their 26-year-old son Ryan who recently graduated from law school but cannot find employment. Ryan lives in DC. According to Mr. Jones on July 01, 2019, he and his wife exchanged their two-family house in Westchester County (378 Pinebrook Blvd, New Rochelle, NY), which they rented entirely from January 01, 2005 to July 01, 2019, for a four family rental property located at 581 Atlantic Avenue, Brooklyn, NY. At the time of the exchange, the FMV of the two-family house was $900,000, and the adjusted basis was $275,000. The four-family house had an adjusted basis of $600,000 and a FMV of $800,000. The two-family home was subject to a $100,000 mortgage, which the buyer assumed. The Jones also owned and rented a two-unit commercial retail building located at 1560 Avenue A, New York NY, which they purchased on December 01, 2018 and placed in service on January 01, 2019. Information for all three of the rental properties is listed below. In March 2019, Bruce decided to start his own business; a retail bicycle shop to be located in NYC near Central Park called “Bruce’s Bikes.” On April 20, 2019, Bruce signed a 10-year lease at a monthly rental rate of $10,000, effective May 01, 2019, for retail space on 110th Street and CPW. The lease provided that Bruce was responsible for the costs of improving the retail space for its intended use. The terms of the lease also provided that the first three months were rent-free so that Bruce could complete the construction needed to operate a retail bike shop. When Bruce executed the lease he paid the landlord $30,000 as a security deposit. On May 01, 2019, Bruce paid a contractor $225,000 to provide all construction work relating to the build-out, which included electrical, plumbing, and carpentry. On June 01, 2019, Bruce purchased the following assets for the business:

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