Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2019, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6782. Janice's parents continue to provide health insurance for her under their policy. Janice did not engage in any virtual currency transactions during the year and wants to contribute to the Presidential Election Campaign Fund.
During 2019, Janice reported the following income and expense items connected with her business.
| Income from sale of articles | $85,000 |
| Rent | 16,500 |
| Utilities | 7,900 |
| Supplies | 1,800 |
| Insurance | 5,000 |
| Travel (including meals of $1,200) | 3,500 |
Janice purchased and placed in service the following fixed assets for her business. Janice wants to elect immediate expensing under 179, if possible.
- Furniture and fixtures (new) costing $21,000 on January 10
- Computer equipment (new) costing $12,400 on July 28
Janices itemized deductions include:
| State income tax | $2,950 |
| Home mortgage interest paid to First National Bank | 6,000 |
| Property taxes on home | 2,500 |
| Charitable contribution to her alma mater, State College | 1,200 |
Janice did not keep a record of the sales tax she paid. The amount allowed by the sales tax table is $437. Janice reports interest income of $4,000 on certificates of deposit at Second National Bank. She made estimated tax payments of $3,000 for 2019.
Required: Compute Janice Morgans 2019 Federal income tax payable (or refund due).
- Make realistic assumptions about any missing data.
- If an amount box does not require an entry or the answer is zero, enter "0".
- Enter all amounts as positive numbers.
- The taxpayer wants $3 to go to the to Presidential Election Campaign.
- It may be necessary to complete the other tax forms and schedules before completing Form 1040.
- Use the tax schedules (not the tax tables) included with this problem to compute the tax.
- If required, round your final answers to the nearest dollar.
PLEASE FILL IN BLANKS FOR 2019 FORM 8995:
OMB No. 1545-0123 Form 8995 Qualified Business Income Deduction Simplified Computation 2019 Attach to your tax return. Go to www.irs.gov/Form8995 for instructions and the latest information. Sequence No. 55 Your taxpayer identification number Department of the Treasury Internal Revenue Service Attachment Name(s) shown on return Janice Morgan 123-45-6782 1 (a) Trade, business, or aggregation name (b) Taxpayer identification number (c) Qualified business income or loss) i Writers Anonymous 123-45-6782 iv v 2 Total qualified business income or (loss). Combine lines li through lv, column (c). 2 3 Qualified business net (loss) carryforward from the prior year. 3 4 4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter-O- 5 Qualified business income component. Multiply line 4 by 20% (0.20). 6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions). 7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year. 6 7 8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0- 8 9 REIT and PTP component. Multiply line 8 by 20% (0.20) 9 10 Qualified business income deduction before the income limitation. Add lines 5 and 9 10 11 Taxable income before qualified business income deduction 11 12 Net capital gain (see instructions) 12 13 Subtract line 12 from line 11. If zero or less, enter -- 13 14 Income limitation. Multiply line 13 by 20% (0.20) 14 15 15 Qualified business income deduction. Enter the lesser of line 10 or line 14. Also enter this amount on the applicable line of your return... 16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter-O- 17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero, enter -0- 16 17 BAA For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. Form 8995 (2019) OMB No. 1545-0123 Form 8995 Qualified Business Income Deduction Simplified Computation 2019 Attach to your tax return. Go to www.irs.gov/Form8995 for instructions and the latest information. Sequence No. 55 Your taxpayer identification number Department of the Treasury Internal Revenue Service Attachment Name(s) shown on return Janice Morgan 123-45-6782 1 (a) Trade, business, or aggregation name (b) Taxpayer identification number (c) Qualified business income or loss) i Writers Anonymous 123-45-6782 iv v 2 Total qualified business income or (loss). Combine lines li through lv, column (c). 2 3 Qualified business net (loss) carryforward from the prior year. 3 4 4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter-O- 5 Qualified business income component. Multiply line 4 by 20% (0.20). 6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions). 7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year. 6 7 8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0- 8 9 REIT and PTP component. Multiply line 8 by 20% (0.20) 9 10 Qualified business income deduction before the income limitation. Add lines 5 and 9 10 11 Taxable income before qualified business income deduction 11 12 Net capital gain (see instructions) 12 13 Subtract line 12 from line 11. If zero or less, enter -- 13 14 Income limitation. Multiply line 13 by 20% (0.20) 14 15 15 Qualified business income deduction. Enter the lesser of line 10 or line 14. Also enter this amount on the applicable line of your return... 16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter-O- 17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero, enter -0- 16 17 BAA For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. Form 8995 (2019)
