James Jones is the owner of a small retail business operated as a sole proprietorship. During 2020, his business recorded the following items of income and expense: Revenue from inventory sales Cost of goods sold Business license tax: Rent on retail space Supplies Wages paid to employees Payroll taxes Utilities Required: $ 147,000 33,500 2,400 42,000 15,000 22,000 1,700 3,600 a. Compute taxable income attributable to the sole proprietorship by completing Schedule C to be included in James's 2020 Form 1040. b. Compute self-employment tax payable on the earnings of James's sole proprietorship by completing a 2020 Schedule SE, Form 1040. c. Assume that James's business is not a service business, and that it has $155,000 unadjusted basis in tangible depreciable property. Calculate James's 2020 QBI deduction, before any overall taxable income limitation. SCHEDULE C (Form 1040) Department of the Treasury-Internal Revenue Service(90) Name of proprietor James Jones Profit or Loss From Business (Sole Proprietorship) Go to www.irs.gov/ScheduleC for instructions and the latest Information Attach to Form 1040, 1040-SR, 1040-NR, or 1041; partnerships generally must file Form 1065. A Principal business or profession, including product or service (see instructions) C Business name. If no separate business name, leave blank E Business address (including suite or room no.) City, town or post office, state, and ZIP code Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate in the operation of this business during 2019? if "No" see instructions for limit on losse H If you started or acquired this business during 2019, check here Did you make any payments in 2010 that would require you to fle Formis) 1099? (see instructions) "Yes," did you or will you file required Forms 10997 Part I Income Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the "Statutory employee box on that form was checked 2 Retums and allowances 3 Subred Ine 2 from line 1 4 Cost of goods sold domine 42) 5 Gross profit. Subtract line 4 from ne 3 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) 7 Gross income. Add lines 5 and 6 Part II Advertising Expenses Car and truck expenses (se instructions) Enter expenses for business use of your home only on line 30. 18 Office expense (see instructions) 19 Pension and profit-sharing plans 9 2.400 20 Rent or losse (see instructiona) 10 Commissions and fees 10 a Vehicles, machinery and equipment 11 Contract labor (see instructions) 11 Jb Other business property 12 Depletion 13 Depreciation and section 179 12 21 Repairs and maintenance 22 Supplies (not included in Part OMB No. 1545-0074 2020 Attachment Sequence No. 09 Social security number (SSN) B Enter code from instructions D Employer ID number (EIN) (see Instr.) Yes No Yes Yes No No 147,000 2 147,000 4 33.500 5 113,500 113,500 10 19 20 200 21 22 9 Car and truck expenses (see Instructions) 9 10 Commissions and fees 10 11 Contract labor (see instructions) 11 12 Depletion 12 13 Depreciation and section 179 19 Pension and profit-sharing plans 2,400 20 Rent or lease (see instructions): Vehicles, machinery, and equipment Other business property 21 Repairs and maintenance 22 Supplies (not included in Part) 191 expense deduction (not included 23 Taxes and licenses 20 200 21 22 23 4,100 in Part ) (see instructions) 13 24 Travel and meals 14 Employee benefit programs (other than on line 19) 15 Insurance (other than health) 16 Interest (see instructions) Mortgage (paid to banks, etc.) bOther a Travel 24 14 b Deductible meals (see 15F Instructions) 245 25 Usities 25 3,600 164 26 Wages (less employment credits) 26 22,000 160 27a Other expenses (from line 48) 27a 17 Legal and professional services 17 b Reserved for future use 27b 28 32,100 29 81,400 28 Total expenses before expenses for business use of home. Add lines 8 through 27s 29 Tentative profit or (loss). Subtract line 28 from line 7 30 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions) Simplified method fliers only enter the total square footage of and (b) the part of your home used for business Worksheet in the instructions to figure the amount to enter on line 30 31 Net profit or (loss) Subtract line 30 from line 29 (a) your home Use the Simplified Method Schedule SE, line 2 fa profit, enter on both Schedule 1 (Form 1040), line 3 (or Form 1040-NR, line 13) and on (if you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3 If a loss, you must go to line 32. 32 If you have a loss, check the box that describes your investment in this activity (see instructions) If you checked 32a, enter the loss on both Schedule 1 (Form 1040), Sine 3 (or Form 1040-NR, line 13) and on Schedule 5, line 2. of you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, Ine 3 If you checked 32b, you must attach Form 6108. Your loss may be limited For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P 30 31 328 All investment is at risk 326 Some investment is not at risk 81,400 Schedule C (Form 1040 or 1040-5R) 2020 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL O 2021 McGraw-Hill Education SCHEDULE SE (Form 1040) Department of the Treasury Internal Revenue Service (99) Self-Employment Tax Go to www.irs.gov/ScheduleSE for instructions and the latest information. Attach to Form 1040, 1040-SR, or 1040-NR. OMB No. 1545-0074 2020 Attachment Sequence No. 17 Name of person with self-employment income (as shown on Form 1040, 1040-SR, or 1040-NR) Social security number of person with self-employment income Self-Employment Tax James Jones Part I Note: If your only income subject to self-employment tax is church employee income, see instructions for how to report your income and the definition of church employee Income A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you had $400 or more of other net eamings from self-employment, check here and continue with Part I Skip lines 1a and 1b if you use the farm optional method in Part II. See instructions. 1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065). box 14, code A b if you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included onSchedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH Skip line 2 if you use the nonfarm optional method in Part II. See instructions. 2 Net profit or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065). box 14, code A (other than farming) See instructions for other income to report or if you are a minister or member of a religious order 3 Combine lines 1a, 1b, and 2 4a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions b If you elect one or both of the optional methods, enter the total of lines 15 and 17 here c Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax. Exception: if less than $400 and you had church employee income, enter -0- and continue Sa Enter your church employee income from Form W-2. See instructions for definition of church employee income b Multiply line 5a by 92.35% (0.9235). If less than $100, enter-0- 6 Add lines 4c and 5b 5a 7 Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.85% railroad retirement (tier 1) tax for 2020 Ba Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tier 1) compensation. If $137,700 or more, skip lines Bb through 10, and go to line 11 b Unreported tips subject to social security tax from Form 4137, line 10 8a 8b 1a 1b 19 2 3 4a 4b 4c 5b 6 7 + 137,700 3 Combine lines 1a, 1b, and 2 4a if line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. b if you elect one or both of the optional methods, enter the total of lines 15 and 17 here c Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax. Exception: If less than $400 and you had church employee income, enter -0- and continue 5a Enter your church employee income from Form W-2. See instructions for definition of church employee income 5a b Multiply line 5a by 92.35% (0.9235). If less than $100, enter-0- 6 Add lines 4c and 5b 7 Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2020 Ba Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tier 1) compensation. If $137,700 or more, skip lines 3 4a 4b 4c 46 5b 6 7 137,700 8b through 10. and go to line 11 b Unreported tips subject to social security tax from Form 4137, line 10 c Wages subject to social security tax from Form 8919, line 10 d Add lines Ba, 8b, and Bc 9 Subtract line Bd from line 7. If zero or less, enter -0- here and on line 10 and go to line 11 10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124) 11 Multiply line 6 by 2.9% (0.029) 12 Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4 13 Deduction for one-half of self-employment tax. Multiply line 12 by 50% (0.50). Enter here and on Schedule 1 (Form 1040), line 14 For Paperwork Reduction Act Notice, see your tax return instructions. 8a 8b 8c 8d 0 9 10 11 12 13 Cat. No. 113582 0 Schedule SE (Form 1040) 2020 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2021 McGraw-Hill Education. Schedule C Part Complete this question by entering your answers in the tabs below. Schedule C Schedule SE Part a Part b Part c Assume that James's business is not a service business, and that it has $155,000 unadjusted basis in tangible depreciable property. Calculate James's 2020 QBI deduction, before any overall taxable income limitation. (Round your intermediate computations and final answers to the nearest whole dollar value.) James's 2020 QBI deduction Schedule SE Part b Part o