HOW TO SOLVE THE FOLLOWING PROBLEM
With these data attached, I need to fill out the requested forms and make depreciation calculations
(3) Enter estimated tax payments on line 16 of form 1040. (Total for the year is $11,500 or $2,875 per quarter) [ topic to be covered later, in 4 to 5 weeks ]. (4) Explain why any amounts above were not included in your calculation. (5) Show all computations on a supporting schedule. (6) See pages C3 & C17 to C18 of the Schedule C instructions for a list of professional acti- vity codes for use on schedule C, Box B ( see your 2018, Schedule C instructions book ) (7) Ignore any child tax credit on line 12 (a) of the Form 1040. (8) See Blackboard (Chp 6) "You Tube" video on "How to Fill Out Schedule C for Business"PROBLEM 1A (30 POINTS) John Smith, age 31, is single and has no dependents. At the beginning of 2019, 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 84059. John's Social Security number is 321-09-6456, and the business identification number is 98-1234567. John is a cash basis taxpayer. During 2019, John had the following items in connection with his business: Put the below expenses and income on the appropriate line on Schedule C. Fees for services Building rental expense $1,276,000 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 Payroll taxes 92,000 7,000 Fuel and oil for the equipment 21,000 B. For the 2 purchases below, any Section 179 deduction to Form 4562, part 1. Any MACRS depreciation to Part 3, line 19 (b) or (c) of the Form 4562. Total depreciation to line 28 of Form 4562. Transfer this total amount to line 13 of Schedule C. 22 Purchase of three front-end loaders on January 15, 2019, $1,010,000. John made the election under sect. 179. 1,010,000 Purchase of a new dump truck on January 18, 2019 45,000 C. During 2019, John had the following additional items: Interest income from First National Bank $ 10,000 [ To Schedule B; then to Form 1040, line 2 (b) ]. Dividends from Exxon (ordinary) 9,500 [ To Schedule B; then to Form 1040, line 3 (b) ]. Quarterly estimated tax payments 11,500 [ Put Estimated Taxes on Form 1040, line 16 ] ; actually goes to Schedule 5, line 66; ignore for now ] Assuming John does not itemize his deductions, compute his Federal income tax payable (or refund due) [ for 2019]. NOTES: (1) Complete forms 1040 and 4562, schedules 1, B and C. Do not complete schedule SE. This schedule will be provided by the instructor along with the solution on next week, if necessary. NOTE: Form 4562 instructions can be obtained from the IRS (or from it's website) or from the instructor, if you desire to review them. ( 2 ) The 2 assets purchased are both 5 year MACRS property (see p. 6-31). He elects to use the maximum allowed section 179 expensing option on the front-end loaders (however, both items are section 179 assets). Include any section 179 deduction (see p. 6-35) on form 4562, part 1, line 6. See page 6-37 and see Example 6.51 on page 6-37 for help. NOTE: Ignore "Bonus (additional first year) depreciation" (Form 4562, line 14), (see text on p. 6-37). Note: Review carefully lines 5 and 1 1 of the Form 4562 for any possible limitations. See pages 4 & 5 of the 23 pages of Form 4562 depreciation instructions, at IRS.gov for more information on limitations [ (a) Click "Forms & Publications" on left; (b) Click "Forms & Instruction no." and (c) Type in "4562" in "Find" box ] ; (also see page 6-35 to 6-36 of the textbook and p. 18 to 19 of Publ 946). NOTE #2: Section 179 expensing option is complex. Do the best you can
