Caroline taxpayer, a single woman with no children, is a business consultant who owns and operates her own unincorporated business, uses the cash method of accounting and reports her income on a calendar year basis She has provided you with the following information concerning her financial affairs during the current calendar year and asks you to compute her tax liability With regard to her consulting business She received $275,000 in fees through a combination of cash and checks from clients She provided $10,000 consulting services to one client, a landscaping company, in exchange for $10,000 in landscaping services the client provide at Carolines request, for Carolines mother Clients still owed her $30,000 for services she provided during the year She paid an employee $60,000 in wages during the year She paid $20,000 for building maintenance, utilities, and office supplies during the year, and She purchased an office building for $1,000,000 on July, 1 2015 which she plans to use for the next 30 years The land in the deal was appraised at $220,000, In December 2016 she paid the real estate taxes on the building for the 2016 tax year of $15,000 Caroline incurred $5,000 in commuting costs in traveling from her home to work during the year plus parking expenses of $2,600 She also paid $2,000 to her accountant in 2016 to prepare her 2015 federal income tax return Caroline received $19,000 interest income this year from an investment account managed by her bank She paid the bank $2,500 for its management services Caroline owns her home, on which she made mortgage payments in the amount of $24,000 during the year Included in the $24,000 were $18,000 in interest payments and $6,000 in principal payments Two years ago, Caroline purchased 100 share of stock in ABC Corporation for $15,000 At the end of last year, the stock had a fair market value of $25,000 This year she received $1,000 in qualified dividends on the stock She sold the stock at year end for $30,000 Caroline contributed $9,000 in cash during the year to the church she attends Caroline paid state and local general sales taxes of $3,000 on the purchase of various for personal use or consumption She paid real property taxes of $4,950 on her home She also paid $14,000 in estimated state income taxes and $40,000 in estimated federal income taxes with respect to her business

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 27, 2024

Caroline taxpayer, a single woman with no children, is a business consultant who owns and operates her own unincorporated business, uses the cash method of

Caroline taxpayer, a single woman with no children, is a business consultant who owns and operates her own unincorporated business, uses the cash method of accounting and reports her income on a calendar year basis. She has provided you with the following information concerning her financial affairs during the current calendar year and asks you to compute her tax liability

With regard to her consulting business:
- She received $275,000 in fees through a combination of cash and checks from clients;
- She provided $10,000 consulting services to one client, a landscaping company, in exchange for $10,000 in landscaping services the client provide at Carolines request, for Carolines mother
- Clients still owed her $30,000 for services she provided during the year;
- She paid an employee $60,000 in wages during the year;
- She paid $20,000 for building maintenance, utilities, and office supplies during the year, and;
- She purchased an office building for $1,000,000 on July, 1 2015 which she plans to use for the next 30 years. The land in the deal was appraised at $220,000, In December 2016 she paid the real estate taxes on the building for the 2016 tax year of $15,000
Caroline incurred $5,000 in commuting costs in traveling from her home to work during the year plus parking expenses of $2,600. She also paid $2,000 to her accountant in 2016 to prepare her 2015 federal income tax return.
Caroline received $19,000 interest income this year from an investment account managed by her bank. She paid the bank $2,500 for its management services.
Caroline owns her home, on which she made mortgage payments in the amount of $24,000 during the year. Included in the $24,000 were $18,000 in interest payments and $6,000 in principal payments.
Two years ago, Caroline purchased 100 share of stock in ABC Corporation for $15,000. At the end of last year, the stock had a fair market value of $25,000. This year she received $1,000 in qualified dividends on the stock. She sold the stock at year-end for $30,000.
Caroline contributed $9,000 in cash during the year to the church she attends.
Caroline paid state and local general sales taxes of $3,000 on the purchase of various for personal use or consumption. She paid real property taxes of $4,950 on her home. She also paid $14,000 in estimated state income taxes and $40,000 in estimated federal income taxes with respect to her business.