Melanie is employed full-time as an accountant for a national hardware chain. She recently started a privateconsulting practice, which provides tax advice and financial planning to the general public. For this purpose,she maintains an office in her home. Expenses relating to her home for 2014 are as follows:Real property taxes$3,600Interest on home mortgage $3,800Operating expenses of home $900Melanie's residence cost $350,000 (excluding land) and has living space of 2,000 square feet, of which 20%(400 square feet) is devoted to business. The office was placed in service in February 2013, and under theregular method, Melanie had an unused office in the home deduction of $800 for 2013. Presuming sufficientnet income from her consulting practice, what is Melanie's office in the home deduction under the:a. Regular methodb. Simplified method

Step 1: Step 2: Step 3: Step 4:

Answered: Melanie is employed full-time as an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.
Ms. Suzanne Morphy is a full time architect. She is also sells vegetables on the side from a small farm she runs in her backyard. In 2018, the first year of operation, she had a loss of $43500 and deducted the maximum allowable amount. What is the amount of her farm loss carryover to future years that can be applied against future farm income?
During 2016, Sarah Bright attends university for four months of full time study and 2 months of part time study.The Total tuition for the year including ancillary fees, is $3200 of which $1000 was prepaid in 2015.The amount paid in 2016 includes $400 in fees that are only charged to students in her geology program.Interest paid for the year on her student loan was $325. determine the total amount of education related tax credits that would be available for Ms. Bright in 2016?
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Lilly works for ACME Inc. in Memphis, Tennessee. She is single and owns her own home. ACME promoted Lilly to a new position that required her to move to Seattle, Washington in July 2022. She decided to rent out her Tennessee residence and found a tenant that took possession on August 1, 2022. The property was rented out at fair rental value. Lily’s total mortgage interest for the entire tax year is $3,000 and property taxes were $900. How much of Lilly’s mortgage interest and property taxes should be reported on her Schedule E?
. Chee, single, age 40, had the following income and expenses during 2018: Income Salary $43,000 Rental of vacation home (rented 60 days, used personally 60 days, vacant 245 days) 4,000 Municipal bond interest 2,000 Dividend from General Electric 400 Expenses Interest on home mortgage 8,400 Interest on vacation home 4,758 Interest on loan used to buy municipal bonds 3,100 Property tax on home 2,200 Property tax on vacation home 1,098 State income tax 3,300 State sales tax 900 Charitable contributions 1,100 Tax return preparation fee 300 Utilities and maintenance on vacation home 2,600 Depreciation on rental portion of vacation home 3,500 Calculate Chee’s taxable income for the year. If Chee has any options, choose the method that maximizes his deductions.
Alexa owns a condominium near Cocoa Beach in Florida. In 2021, she incurs the following expenses in connection with her condo: $ 2,000 6,500 2,000 Insurance Mortgage interest Property taxes Repairs & maintenance Utilities 1,400 2,500 14,500 Depreciation During the year, Alexa rented out the condo for 100 days. She did not use the condo at all for personal purposes during the year. Alexa's AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income. Assume Alexa receives $30,000 in gross rental receipts. a. What effect do the expenses associated with the property have on her AGI? Gross rental income Expenses: Less: total expenses Balance-net rental income
Betty operates a beauty salon as a sole proprietorship. Betty also owns and rents an apartment building. This year Betty had the following income and expenses. You may assume that Betty will owe $2,502 in self-employment tax on her salon income, with $1,251 representing the employer portion of the self-employment tax. You may also assume that her divorce from Rocky was finalized in 2016. Interest income $ 11,255 Salon sales and revenue 86,360 Salaries paid to beauticians 45,250 Beauty salon supplies 23,400 Alimony paid to her ex-husband, Rocky 6,000 Rental revenue from apartment building 31,220 Depreciation on apartment building 12,900 Real estate taxes paid on apartment building 11,100 Real estate taxes paid on personal residence 6,241 Contributions to charity 4,237 b-1. Complete Schedule 1 of Form 1040 for Betty.
Tony and Lyly are married during the tax year. Tony is a botanist at Red Corporation. Tony earns a salary of $70,000 per year. Lyly owns an accounting practice as a sole proprietor (it qualifies as a full trade or business). Lyly generates $100,000 of revenues during the year. She has the following business payments associated with her firm: Utilities: $2,000 Office Rent: $15,000 Office Supplies: $1,700 Self-employed health insurance premiums: $5,000 Self-Employment Tax (hers): $10,000 Salary for her secretary: $25,000 Fines/Penalties: $2,500 State Income Tax (from business): $6,000 Payroll Taxes (secretary’s): $2,000 Meals: $1,200 (100% for 2021) Payment to officer to let her go from speeding while on her way to a client meeting $100 Lyly also contributed $6,000 into her Traditional IRA. They also have the following personal expenses during the year: Medical Expenses: $17,500 State & Local Taxes (personal): $11,000 Federal Income Tax Payments (personal): $7,000 Cash…

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