Martin Galloway, the sole proprietor of a consulting business, has gross receipts of $45,000 in 2016. His address is: 1223 Fairfield Street, Westfield, New Jersey and his SSN is 158-68-7799. Expenses paid by his business are:

Advertising……………………………………….$500

Supplies………………………………………….2,900

Taxes and licenses…………………………………500

Travel (other than meals)………………………….600

Meals and entertainment…………………………..400

Health insurance premiums (for Martin)…………1,400

Individual retirement account contribution………2,500

During the year Martin drives his car a total of 15,000 miles (700 business miles per month and 550 personal miles per month). He paid $100 for business-related parking and tolls. He paid $120 in fines for speeding tickets when he was late for appointments with clients. Martin’s office is located in his home. His office occupies 500 of the 2,000 square feet in his home. His total (unallocated) expenses for his home are:

Mortgage interest……………………………..$6,000

Real estate taxes……………………………….1,700

Insurance…………………………………………700

Repairs and maintenance…………………………300

Utilities…………………………………………1,600

Depreciation for the business portion of his home is $1,364.

a. What is Martin’s net income (loss) from his business?

b. How much self-employment tax must Martin pay?

c. Based on this information, are there any other deductions that Martin can claim on his individual tax return other than those reported on his Schedule C?

d. How would your answers to the above items change if Martin elects to use the simplified method for home office expenses?



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