Pedro Rodrguez Cruz and Mnica Santiago Del Valle are married under the community property regime and file their income tax return as married filing jointly. Pedro's date of birth is January 1, 1950 and Monica's is February 1, 1955. The couple's address is 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 (Salesperson-retail), owns a business for his own account (sole proprietor), Medical Equipment & 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 about 40 hours a week. The result of its operations, under the accrual method and on a tax basis, during 2021 was as follows: sales Cost of goods sold Rental expense Professional services Others $325,000 (no information in 480s) 150,0001 24,000 16,000 10,000 The business meets all the requirements to claim all of its expenses for purposes of the regular tax and the alternate basic tax. Submitted the "Agreed Procedures" (AUP).

Beginning inventory $25,000 + Purchases $400,000 ending inventory $275,000

Corporate stocks Monica owns a 9% stake in the Monte Azul Corporation, a domestic corporation. The shares were part of her grandmother's inheritance and Monica received them before marrying Pedro. During 2021, the Corporation paid Monica the amount of $8,000 in dividends, as shown in the following Information Statement: (Assume the following Statement is for 2021)

Monica Santiago, dba, Sugar Bakery Monica, Pastry Chef, (Cook) owns a business on her own, Sugar Bakery, dedicated to the preparation and sale of biscuits and pastry items. Monica began 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 is located in San Juan. The result of its operations, under the accrual method and on a tax basis, during 2021 was as follows: Sales Cost of goods sold Electricity Aqueducts and sewers Professional services Others $70,000 (not reported in 480s) 50,0002 3,000 2,000 25,000 15,000 The business meets all the requirements to claim all of its expenses for purposes of the regular tax and the alternate basic tax. Submitted the Agreed-Upon Procedures (AUP). Salary Monica 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 $16,000, as shown in the following Withholding Statement: (Assume the following form is for 2021)

Corner Apartment Pedro owns an apartment as a second home. The apartment is located in Rincn, Puerto Rico. During 2021, the apartment was rented, for vacation purposes, throughout the year. This apartment began to be rented on July 1, 2016. The result of the rental operations, under the cash method and on a tax basis, was as follows: Rental Income: 20,000 Repairs and maintenance 4,500$ Professional services 12,000$ Taxes on real estate property Announcements 1,500$

Advertisement 1,200 Electricity 2,000 Aqueduct and sewers 1,500 Others 2,000 Depreciation $20,000 (not reported in 480s) 4,500 12,000 1,500 1,200 2,000 1,500 2,000 ? 3 The business meets all the requirements to claim all of its expenses for purposes of the regular tax and the alternate basic tax. Submitted the Agreed-Upon Procedures (AUP).

Personal Outlays 1. The couple has the following dependent: Pedrito Rodrguez Lpez, grandson of Pedro, who was born on August 15, 2011. 2. Pedro made four (4) payments of $5,000 in estimated contributions during 2021 (3/31, 6/30, 9/30 and 12/31) for a total of $20,000. Estimated payments match estimated contribution payments. (Schedule T). 3. The married couple has the following deduction applicable to individuals: (Assume the following form is for 2021)

Instructions

a. What is the net income (loss) of Medical Equipment & Supply.? b. Sugar Bakery's net income (loss). c. the deduction for depreciation for the property used in the rental activity. 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 income tax. h. the income tax payable or the refund to be received.