Practice Set Assignments, Comprehensive Tax Return Problems PROBLEM 1 Miguel and Sofia Arroyo are married and live at 13071 Sterling Drive, Marquette, MI 49866. Miguel is a self-employed insurance claims adjuster (business activity code 524290), and Sofia is the dietitian for the local school district. They choose to file a joint tax return each year. 1. Miguel represents several national casualty insurance companies on a contract basis. He operates this business on the cash basis. He is paid a retainer and receives additional compensation if the claims he processes for the year exceed a specified number. During 2020, Miguel received $84,800 in payment for ser- vices rendered as reported on Forms 1099-MISC issued by several payor insur- ance companies. As an independent contractor, he is responsible for whatever expenses he incurs. Miguel works out of an office near his home. The office is located at 1202 Moose Road. He shares Suite 326 with a financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the landlord. Miguel paid his one-half share of the 2020 expenses as detailed below. Office rent $11,600 Utilities (includes telephone and fax) 4,300 Replacement of waiting room furniture on April 22 Renters insurance covers personal liability, casualty, theft) 1.400 Office expense (supplies, postage) 740 Toshiba copier (purchased new on February 7) Waiting room coffee service (catered) 280 Waiting room magazine subscriptions 90 For his own business use, Miguel purchased a $2,100 laptop computer on June 17 and a $1,200 Nikon camera on February 5. Except for his vehicle (see item 2 below), Miguel uses the $ 179 write-off option whenever possible. Miguel has no expenditures for which he is required to file Form 1099s 3,600 300 Practice Set Assignments, Comprehensive Tax Return Problems PROBLEM 1 Miguel and Sofia Arroyo are married and live at 13071 Sterling Drive, Marquette, MI 49866. Miguel is a self-employed insurance claims adjuster (business activity code 524290), and Sofia is the dietitian for the local school district. They choose to file a joint tax return each year. 1. Miguel represents several national casualty insurance companies on a contract basis. He operates this business on the cash basis. He is paid a retainer and receives additional compensation if the claims he processes for the year exceed a specified number. During 2020, Miguel received $84,800 in payment for ser- vices rendered as reported on Forms 1099-MISC issued by several payor insur- ance companies. As an independent contractor, he is responsible for whatever expenses he incurs. Miguel works out of an office near his home. The office is located at 1202 Moose Road. He shares Suite 326 with a financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the landlord. Miguel paid his one-half share of the 2020 expenses as detailed below. Office rent $11,600 Utilities (includes telephone and fax) 4,300 Replacement of waiting room furniture on April 22 Renters insurance covers personal liability, casualty, theft) 1.400 Office expense (supplies, postage) 740 Toshiba copier (purchased new on February 7) Waiting room coffee service (catered) 280 Waiting room magazine subscriptions 90 For his own business use, Miguel purchased a $2,100 laptop computer on June 17 and a $1,200 Nikon camera on February 5. Except for his vehicle (see item 2 below), Miguel uses the $ 179 write-off option whenever possible. Miguel has no expenditures for which he is required to file Form 1099s 3,600 300
