Robert Lento, the sole proprietor of a consulting business, has gross receipts of $600,000 in 2016. 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 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?



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