1) What amount of Amanda’s gross business revenue is included in Gross Income?
Bruce and Amanda are married during the tax year. Bruce is a botanist at Green Corporation. Bruce earns a salary of $56,000 per year. Green Corporation has an accountable reimbursement plan. During the year, Bruce has $5,000 of employee expenses. Green Corporation reimburses Bruce for only $4,000 of expenses.
Bruce decides to put $5,500 into a Traditional IRA.
Amanda owns a financial consulting firm as a sole proprietor (it qualifies as a full trade or business). Amanda generates $80,000 of revenues during the year. She has the following business payments associated with her firm:
- Utilities: $2,000
- Office Rent: $14,000
- Self-Employment Tax: $5,000
- Salary for her secretary: $20,000
- Fines/Penalties: $8,000
- Payroll Taxes (Employer Portion): $1,000
- Business Meals: $2,000
- Bribe to police officer to forgive parking violation $1,500
Due to the income and expenses above, Amanda has $39,500 of Qualified Business Income for the purposes of the QBI deduction.
Also, during the year a tornado damaged the roof of their personal residence. They purchased the home five years ago for $250,000. The value of the home after the tornado was $200,000. Bruce and Amanda do not know the fair market value of the home immediately before the tornado, but the repair cost was $20,000. The home is located in a federally declared disaster area.
They also have the following personal expenses during the year:
- Medical Expenses: $18,750
- State & Local Taxes $4,000
- Federal Income Tax Payments: $6,000
The personal exemption amount for the tax year is: $0
The standard deduction amounts are listed below:
- Single: $12,400
- Head of Household: $18,650
- Married Filing Jointly: $24,800
Questions (10):
1) What amount of Amanda’s gross business revenue is included in Gross Income?
2) How much of a deduction does Bruce get for the contribution to his IRA?
3) Bruce & Amanda's Gross Income:
4) What is the total deductible amount of Amanda’s business expenses?
5) Bruce & Amanda's Adjusted Gross Income:
6) What is the deductible amount of their medical expenses after limitations?
7) What is the deductible amount of their deductible casualty loss after limitations?
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