1.Carlos is self-employed. During the year, he had the following business income and expenses. What is his gross income for the tax year?

• Income $16,050
• Cost of goods sold $5,000
• Advertising $1,000
• Legal and professional fees $280
• Office expense $125
• Supplies $310
• Business license $100
• Utilities $420

$11,050

$13,815

$16,050

2. Donald is a general partner in a partnership; his share of ordinary income was reported in box 14 of Schedule K-1. Which of the following statements is TRUE?

Donald is considered an employee.

The amount of income reported in this box will be taxed at the rate that applies to long-term capital gains.

His ordinary income is not subject to self-employment tax.

His ordinary income is subject to self-employment tax.

3.Which taxpayer may be able to deduct home office expenses?

Doug is self-employed. His office is away from his home but he uses his home occasionally for business.

Randy, a self-employed interior designer, uses part of his home for business. He uses it regularly and exclusively to meet with clients.

Sue is an employee of ABC Corporation. She works remotely from home three days a week.

4. Juan is self-employed. During the tax year, he had the following income and expenses:

• Gross receipts: $80,000
• Advertising: $1,000
• Office expense: $300
• Rent: $10,000
• Liability insurance: $3,000
• Bookkeeping fees: $500
• Utilities: $2,000
• Business meals purchased at restaurants: $1,000

What is Juan's net profit (or loss) for the tax year?

$17,800

$62,200

$62,700

$80,000