I. DATA

Pedro Rodrguez Cruz and Mnica Santiago Del Valle, are married under the economic regime of society of

marital property and file their income tax return as married filing jointly. The date

Pedro's birth date is January 1, 1950 and Monica's is February 1, 1955. The address of the

marriage the urb. Bella Vista, Calle Monte #1, San Juan, PR 00910. Both are citizens of the United States

United States of America, residents of Puerto Rico, have not generated income outside of Puerto Rico, and are not

military.

During taxable year 2021 they carried out the following activities.

Pedro Rodrguez, dba, Medical Equipment and Supplies

Pedro, merchant (Seller-retailer), owns a business on his own account ("sole proprietorship"),

Medical equipment and supplies dedicated to the sale and distribution of medical equipment. The business is

Located in San Juan. Pedro began operations on January 2, 2012 and works there for a few

40 hours a week. The result of its operations, under the accrual method and on a basis

tax, during 2021 was as follows:

Sales $295,000 (not reported in 480s)

Cost of goods sold 170,000 (Beginning inventory $35,000 + Purchases $410,000 ending inventory $275,000)

Rental expense 24,000

Professional services 16,000

Other 10,000

The business meets all the requirements to claim all of its expenses for tax purposes.

regular tax and alternate basic tax. Submitted the Agreed-Upon Procedures (AUP).

Monica Santiago, dba, Sugar Bakery

Monica, Pastry Chef, (Cook) owns her own business, Sugar Bakery, dedicated to

preparation and sale of biscuits and pastry items. Monica started the operation of her business

on April 1, 2021 and actively participates in the business at a rate of 35 hours per week. The business

It is located in San Juan. The result of its operations, under the accrual method and in a tax base, during 2021 was as follows:

Sales $70,000 (not reported in 480s)

Cost of goods sold 50,000(Beginning inventory $0 + purchases $70,000 ending inventory $20,000)

Electric power 3,000

Aqueducts and sewers 2,000

Professional services 25,000

Other 15,000

The business meets all the requirements to claim all of its expenses for tax purposes.

regular tax and alternate basic tax. Submitted the Agreed-Upon Procedures (AUP).

Monica Salary

Monica worked as a Pastry Chef in a hotel until the date of her resignation on March 31, 2021.

For the first three (3) months of 2021, Monica received a salary of $15,000.

Corporate Actions

Monica owns a 9% interest in the Monte Azul Corporation, a domestic corporation. The

shares were part of her grandmother's inheritance and Monica received them before getting married

With Pedro. During 2021, the Corporation paid Monica the amount of $11,000 in dividends,

as it arises from the following Informative Declaration.

Rental Activity Commercial Building

Pedro owns a commercial building located in Arecibo, Puerto Rico. During 2021, the building

It was rented throughout the year. The rental activity was started by the taxpayer on the 1st of

July 2016. The result of rental operations, under the cash method and on a

contribution, was as follows:

Rental Income: $24,000 (not reported in 480s)

Repairs and maintenance 8,500

Professional services 9,000

Taxes on real property 1,500

Electricity 3,500

Aqueduct and sewers 1,800

Other 2,000

Depreciation? (The rental property was purchased on July 2, 2016, and has a cost of $210,000. The taxpayer computes the depreciation)

of the property under the current depreciation method.

The business meets all the requirements to claim all of its expenses for tax purposes.

regular tax and alternate basic tax. Submitted the Agreed-Upon Procedures (AUP).

Personal Outlays

1. The couple has the following dependent:

Pedrito Rodrguez Lpez, Pedro's grandson, who was born on August 15, 2011.

2. Pedro made four (4) payments of $2,000 in estimated contributions during 2021 (3/31/21,

6/15/21, 9/15/21 and 01/15/22) for a total of $8,000. The estimated payments coincide with the

estimated contribution payments. (Schedule T).

3. Marriage has the following deduction applicable to individuals:

II. REQUIREMENT 1

1. Requirements: Calculate

to. Medical Equipment & Supply's net income (loss).

b. Sugar Bakery's net income (loss).

c. the deduction for depreciation for the property used in the activity of

rent.

d. the net income (loss) from the rental activity.

and. adjusted gross income for marriage in 2021.

F. the net taxable income for the marriage in 2021.

g. the normal tax, the tax at a preferential rate and the total tax

about income.

h. the income tax payable or the refund to be received.