Alisha, who is single, owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home where she meets with clients, prepares bills, and performs other work-related tasks. She purchased the home at the beginning of year 1 for $400,000. Since she purchased the home and moved into it, she has been able to deduct $10,000 of depreciation expenses to offset her consulting income. At the end of year 3, Alisha sold the home for $500,000. What is the amount of taxes Alisha will be required to pay on the gain from the sale of the home? Alisha's ordinary marginal tax rate is 32 percent. (Ignore the net investment income tax.) Taxes to be paid

Alisha, who is single, owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home where she meets with clients, prepares bills, and performs other work-related tasks. She purchased the home at the beginning of year 1 for $400,000. Since she purchased the home and moved into it, she has been able to deduct $10,000 of depreciation expenses to offset her consulting income. At the end of year 3, Alisha sold the home for $500,000. What is the amount of taxes Alisha will be required to pay on the gain from the sale of the home? Alisha's ordinary marginal tax rate is 32 percent. (Ignore the net investment income tax.) Taxes to be paid

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information: She received $100,000 in salary. She received $20,000 of dividend income. She received $4,100 of interest income on Home Depot bonds. She received $24,500 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $6,900. She received $15,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,700. Mary receives one exemption ($4,000), and she has allowable itemized deductions of $7,500. These amounts will be deducted from her gross income to determine her taxable income. Assume that her tax rates are based on Table 3.5. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. a) What is Mary's federal tax liability? Round your answer to the nearest cent. Do not round…
[The following information applies to the questions displayed below.] Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Jasmine, Michael, and Candice). The Jacksons file a joint tax return. The couple received salary income of $95,500 and qualified business income of $19,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $247,500 and they sold it for $297,500. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $18,400 of itemized deductions, and they had $4,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice was 18 years of age at year end, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) Comprehensive…
Godo In 2017, Karen purchased a house for $150,000 to use as her personal residence. She paid $30,000 and borrowed $120,000 from the local savings and loan company. In 2020, she paid $20,000 to add a room to the house. In 2022 she paid $2,400 to have the house painted and $1,200 for built-in bookshelves. As of January 1 of the current year, she has reduced the $120,000 mortgage to $108,300. What is her basis for the house?
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 $1,500Due to the income and expenses above, Amanda has $39,500 of Qualified Business Income. Also, during the year a tornado damaged the roof of their personal…
Aiden is married and has salary income of $80,000 and total itemized deductions is $30,000. During the year, he sold two investments resulting in a $5,000 long-term capital gain and a $15,000 short-term capital loss. He calculated his AGI to be $70,000 (80,000 -10,000) and his taxable income to be $40,000 (70,000-30,000). Based on the tax formula and the net capital loss rules, comment on whether or not the adjusted gross income and taxable income are correct. Explain and provide support for your position.
Christ owns a factory building that he has used in his business for many years. On 1/28/20, the factory was totally destroyed in a fire. Christ received $ 5,000,000 from his insurance company for this total loss. At the time of this loss, Christ had an adjusted basis in this factory of $ 2,000,000 ($ 3,000,000 original cost less $ 1,000,000 in accumulated straight-line tax depreciation). Christ replaced the factory at a cost of $ 4,800,000 in November of 2020. Calculate Christ’s 2020 realized gain of loss from the above How much gain or loss will Christ recognize for tax purposes in 2020? How much additional federal tax will Christ incur in 2020 assuming his marginal ordinary income tax rate is 37% and his net capital gain rate is 20%? What is Christ’s tax basis in the replacement factory building?
lly Tucker (single) owns and operates a bike shop as a sole proprietorship. In 2022, she sells the following long-term assets used in her business: Asset Building Equipment Sales Price $ 235,000 85,000 Cost $ 205,000 153,000 Accumulated Depreciation $ 57,000 28,000 lly's taxable income before these transactions is $195,500. What are Lily's taxable income and tax liability for the year? Use Tax Rate Schedule for reference. Note: Do not round Intermediate calculations. Round your final answers to the nearest whole dollar amount. Description Taxable income Tax liability Amount $ 242,500
Jasmin is a mechanic. She runs her own business specialising in repairing electric cars. During the year, Jasmin incurred the following expenses: a) salary costs to her two regular employees of $150,000 (paid electronically through the business’s payroll system, which automatically applies the relevant tax withholding and pays the amount to the ATO); b) $5,000 on special overalls and eye goggles for Jasmin and her employees to use when they are repairing cars; c) childcare costs of $22,000 so that Jasmin can go to work every day; d) $1,000 on a one-day course on a new accounting software program that Jasmin wants to use in the business to better comply with new tax reporting requirements. Required: Advise Jasmin whether the above expenses would be deductible for income tax purposes.
Ryan is self-employed. This year Ryan used his personal auto for several long business trips. He paid $1,850 for gasoline on these trips. Ryan estimates that he drove approximately 2,220 miles on business trips, but he can only provide written documentation of the business purpose for trips totaling 1,400 miles. His depreciation on the car if he was using it fully for business purposes would be $3,000. During the year, he drove his car a total of 18,500 miles (a combination of business and personal travel). What business expense amount can Ryan deduct (if any) for these trips? (Do not found intermediate calculations. Round your final answers to the nearest whole dollar amount.) Maximum deductible amount
After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $312,000. Ingrid allocated $52,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis. a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
Shellie purchased a passenger automobile on March 2, 2018. She paid $65,000 for the automobile and can support business use of 85 percent. Calculate the amount of depreciation on the automobile for 2018 using the accelerated MACRS method (if available), assuming Shellie does not make the election to expense or claim bonus depreciation
Alicia sold her personal residence to Rick for $300,000. Before the sale, Alicia paid the real estate tax of $4,380 for the calendar year. For income tax purposes, the deduction is apportioned as follows; $2,160 for Alicia and $2,220 for Rick. What is Ricks basis in the residence?