Solved by verified expert :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
