1. Calculation of qualified business income deduction (LO. 4)

Tom is single and operates a golf store as a sole proprietorship. In 2018, the store has $130,000 of net income. Tom does not itemize and has other income from interest and dividends of $2,000.

What is Tom's QBI deduction for 2018? $____________.

What is his taxable income? $____________.

a. Assume the same facts as above, except that Tom is a CPA and operates an accounting firm as a sole proprietorship and his net income is $190,000. In addition, he has capital gains of $3,000.

What is Tom's QBI deduction for 2018? $___________.

What is his taxable income? $___________.

b. Assume the facts of the original problem except that Tom has itemized deductions of $25,000 but the QBI from the business is $500,000, W-2 wages are $120,000, and unadjusted depreciable property is $180,000.

What is Tom's QBI deduction for 2018? $___________.

What is his taxable income? $___________.

2. Insurance, Taxes, and Legal Fees (LO. 6)

Martin receives the following tax bills, related to a rental dwelling, from the county treasurer:

Special assessment for installing sidewalks and streets	$12,000
Real property tax on dwelling for the 1/1/1812/31/18 property tax year, due on 10/1/18	$1,500

On May 1, 2018, Martin sells the dwelling for $70,000. His basis in the dwelling at the date of sale is $40,000. Martin's basis in the dwelling does not reflect the property tax bills. As part of the sale contract, the buyer agrees to pay the real property taxes when they come due on October 1, 2018, but Martin has to pay the special assessment before the sale closes.

Complete the statements below which outline the proper tax treatment for each tax payment. Do not round intermediate calculations.

The tax imposed for local benefit is deemed to increase the basis of the taxpayer's property. When the seller pays the $12,000 special assessment, the expenditure is added to the basis as a capital expenditure .

When the rental dwelling is sold, the annual real estate tax must be allocated between the buyer and the seller of the property. The allocation is $________ for Martin and $________ for the buyer.

Martin has a gain of $_________ on the sale of the dwelling.

3. Reimbursed Employee Business Expenses (LO. 7)

Alvin is an employee of York Company. During 2018, he incurs the following employment-related expenses:

Travel	$4,000
Meals	3,500
Lodging	2,500

a. Complete the statements below outlining how Alvin is to treat his employment-related expenses if York Company has an accountable employee business expense reimbursement plan.

If an amount is zero, enter "0".

3a. Alvin is reimbursed $9,000.

The $9,000 is included in gross income and Alvin is allowed a deduction for adjusted gross income.

3b. Alvin is reimbursed $10,000.

$_________ gross income is reported and deductions are not taken.

3c. Alvin is reimbursed $11,000.

$__________ gross income is reported and deductions are not taken.

4. Interest on Education Loans (LO. 11)

Martha, who is single, graduated from Tassle Tech and immediately started working as an accountant for Creedon Industries. To finance her college education, she borrowed $23,000 from a local bank, and pays $1,800 of interest expense during the year. Her adjusted gross income for the year is $39,000.

a. Martha can deduct $__________ of student loan interest for adjusted gross income .

b. If Martha borrowed $32,000 to finance her education and paid interest during the year of $2,700, Martha can deduct $_________ of the interest for adjusted gross income.

c. When her adjusted gross income is $70,000 Martha can deduct $__________as student loan interest. Assume the other facts are the same as in part a. Do not round intermediate calculations.