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chapter 8 tax 2 questions.

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Question

Problem 62

 

 

Janice Morgan, age 32, is single and has no dependents. She is a freelance writer. In January 2013, Janice opened her own office located at 22751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6789. Janice wants to contribute to the Presidential Election Campaign Fund. During 2013, Janice had the following income and expense items connected with her business:

 

 

Income from sale of articles $85,000

 

 

Rent 16,500

 

 

Utilities 7,900

 

 

Supplies 1,800

 

 

Insurance 5,000

 

 

Travel (including meals of $1,200) 3,500

 

 

Janice purchased and placed in service the following fixed assets for her business:

 

 

Furniture and fixtures (new) costing $21,000 on January 10.

 

 

Computer equipment (new) costing $12,400 on July 28.

 

 

Janice elected immediate expending under Section 179.

 

 

Janice\'s itemized deductions are as follows:

 

 

State income tax $3,000

 

 

Home mortgage interest 6,000

 

 

Property taxes on home 1,500

 

 

Charitable contributions 1,200

 

 

Janice did not keep a record of the sales tax she paid. The amount from the sales tax table is $437

 

 

Janice has interest income of $20,000 on certificates of deposit at Second Bank. Janice makes estimated tax payments of $3,00 for 2013.

 

 

Compute Janice Morgan\'s 2012 Federal income tax payable (or refund due).

 

 

Problem 63

 

 

John Smith, age 31, is single and has no dependents. At the beginning of 2014, John started his own excavation business and named it Earth Movers. John lives at 1045 Center

 

Street, Lindon, UT, and his business is located at 381 State Street, Lindon, UT. The

 

ZIP Code for both addresses is 84042. John’s Social Security number is 111-11-1111, and the business identification number is 11-1111111. John is a cash basis taxpayer. During 2014, John had the following items in connection with his business:

 

Fees for services $460,000

 

Building rental expense 36,000

 

Office furniture and equipment rental expense 9,000

 

Office supplies 2,500

 

Utilities 4,000

 

Salary for secretary 34,000

 

Salary for equipment operators 42,000

 

Payroll taxes 7,000

 

Fuel and oil for the equipment 21,000

 

Purchase of three new front-end loaders on January 15, 2014, for $550,000. John made the election under § 179. 550,000

 

Purchase of a new dump truck on January 18, 2014 80,000

 

During 2014, John had the following additional items:

 

Interest income from First National Bank $10,000

 

Dividends from ExxonMobil 9,500

 

Quarterly estimated tax payments 11,500

 

John does not take additional first-year depreciation.

 

On October 8, 2014, John inherited IBM stock from his Aunt Mildred. John had been her favorite nephew. According to the data provided by the executor of Aunt Mildred’s estate, the stock was valued for estate tax purposes at $110,000. John is considering selling the IBM stock for $125,000 on December 29, 2014, and using $75,000 of the proceeds to purchase an Acura ZDX. He would use the car 100% for business. John wants to know what effect these transactions would have on his 2014 adjusted gross income.

 

Write a letter to John in which you present your calculations. Also prepare a memo for the tax files

 

Paper#39983 | Written in 07-Dec-2015

Price : $30
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