IRS Solution - $12,250 Note 1 $2,700 is $75/month on a...

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IRA - Individual Rehabilitation Services SOLUTION (Tax Calculations) Sales $156,100 LESS: Cost of Goods Sold (51,100) * Gross Profit $105,000 LESS: Wages $20,870 Rent ($250 x 12) 3,000 600 Depreciation 2,430 Interest 450 Utilities 1,400 Food license 400 1,300 650 1,600 Telephone 480 Supplies 1,300 Miscellaneous 520 (35000) Taxable Income before specific deduction 70000 Less: Specific deduction (1000) U B T I—Unrelated Business Taxable Income 69000 Federal Income Tax 12250 ** Less: Credits and payments (10000) Taxes Owed at the time of filing $2,250 F I F O L I F O Beginning Inventory $12,000 $11,200 Add: Purchases 52,000 52,000 Goods available $64,000 $63,200 Less: Ending Inventory (14,000) (12,100) Cost of Goods Sold $50,000 $51,100 $50,000 @ 15% = $7,500 19,000 @ 25% = 4,750 Federal Income Tax
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Unformatted text preview: $12,250 Note 1: $2,700 is $75/month on a 3-year policy. $450 is six months of current year coverage (July through December). Note 2: $600 would be capitalized and included in the value of the restaurant to be built. Note 3: Fine is not allowed as a deduction on an income tax return. Note 4: $2,400 is a prepaid expense and is not deductible on the current year tax return. Solution prepared by Ken Milani, Professor, University of Notre Dame. Reprinted with permission. Property Insurance (150 + 450) Note 1 Professional fees (200 + 1,100) Note 2 Repairs and Maintenance Note 3 Advertising and Promotion Note 4 * Cost of Goods Sold ** Tax Calculation...
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