Solutions Chapter 6 - Problems 44 (pg. 282) & 61 (pg....

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44. Comprehensive Problem for Chapters 4, 5, and 6 Robert, the sole proprietor of a consulting business, has gross receipts of $600,000 in 2011. Expenses paid by his business are: Advertising $ 2,500 Employee salaries 150,000 Office rent 24,000 Supplies 18,000 Taxes and licenses 17,000 Travel (other than meals) 3,800 Meals and entertainment 2,400 Utilities 3,800 Employee health insurance premiums 6,600 Health insurance premiums for Robert 2,200 Robert purchased a new car for his business on May 15 at a cost of $28,000. He also purchased $50,000 of new 5-year equipment and $238,000 of used 7-year fixtures on August 1. Robert drove the new car 10,000 miles (8,000 for business and 2,000 personal miles). He paid $200 for business-related parking and tolls. He also paid $1,000 for insurance and $1,200 for gasoline and oil for the new car. He would like to maximize his deductions. a. What is Robert’s net income (loss) from his business? b. How much self-employment tax must Robert pay? c. If this is Robert’s only source of income, what is his adjusted gross income? Solution: a. Robert’s net income from his business in 2011 is $74,292 Gross Income $600,000 Less: Advertising 2,500 Employee Salaries 150,000 Office Rent 24,000 Supplies 18,000 Taxes and licenses 17,000 Travel (other than meals) 3,800 Meals and Entertainment (limited to 50% of $2,400) 1,200 Utilities 3,800 Employee Health Insurance Premiums 6,600 226,900
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Solutions Chapter 6 - Problems 44 (pg. 282) & 61 (pg....

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