Problem 7-20 points Tara Murphy (age 39 and single) had previously never worked but started a high quality art gallery business on January 2, 2017 During the year the business had the following activity Purchased paintings for Made cash sales of paintings (costing $280,000) for Delivered a painting (costing $150,000) on 12/28/17, but payment wasn't received until January 7, 2018 Due to a small fire in the basement a painting costing $40,000 but worth $200,000 was destroyed. The painting was not insured All remaining inventory was on hand at year end She paid an attorney to form her new business She printed flyers to advertise her buisness and had a high school student hand them out 2,000 Tara paid salaries and operating expenses of Due to the initial success of her business Tara bought her 3 employeesa Rolex watch costing $10,000 each She gave them these gifts at the Christmas party at Aqua She paid medical insurance for her employees of The business paid her medical insurance of 2,500 (7,000) Tara's personal car was driven 8,000 mies, 40% of which were business related. Auto expenses incurred were: 3,500 3,000) (2,500] 1,100) 275 Parking & tolls ( all business related Parking tickets (all business related Tara wants to use the cash method of accounting. Tara also had the following income and expenses: Loss on sale of her personal car Gain on sale of stock Rental income from parking lot rental Maintenance and untilities on parking lot Interest income from Wells Fargo bond Paid interest expense on loan taken out to buy Wells Fargo bond Property taxes on her home Before deciding to open the Art store, Tara had considered opening an Applebees and had incurred research costs of Paid investment advisor fees f Due to the stress of opening her own business, Tara booked herself into Paso Robles for some much needed relaxation Cosmetic surgery (eye lifh and nose job). Tara believes this is a business expense as she has to look good for her clients ,000 2,000) 50,000 6,000) (12.000) (25,000) (16,000) Entertaining her largest client she incurred the folowing costs: Cab fare Dinner restaurant Tip to waiter Tickets to Giants Game 35 100 A 8 C D What is Tara's net business income for the year? What is Tara's adjusted gross income for the year? What is Tara's taxable income for the year? What is Tara's net tax liability for the year? (ignore AMT Problem 7-20 points Tara Murphy (age 39 and single) had previously never worked but started a high quality art gallery business on January 2, 2017 During the year the business had the following activity Purchased paintings for Made cash sales of paintings (costing $280,000) for Delivered a painting (costing $150,000) on 12/28/17, but payment wasn't received until January 7, 2018 Due to a small fire in the basement a painting costing $40,000 but worth $200,000 was destroyed. The painting was not insured All remaining inventory was on hand at year end She paid an attorney to form her new business She printed flyers to advertise her buisness and had a high school student hand them out 2,000 Tara paid salaries and operating expenses of Due to the initial success of her business Tara bought her 3 employeesa Rolex watch costing $10,000 each She gave them these gifts at the Christmas party at Aqua She paid medical insurance for her employees of The business paid her medical insurance of 2,500 (7,000) Tara's personal car was driven 8,000 mies, 40% of which were business related. Auto expenses incurred were: 3,500 3,000) (2,500] 1,100) 275 Parking & tolls ( all business related Parking tickets (all business related Tara wants to use the cash method of accounting. Tara also had the following income and expenses: Loss on sale of her personal car Gain on sale of stock Rental income from parking lot rental Maintenance and untilities on parking lot Interest income from Wells Fargo bond Paid interest expense on loan taken out to buy Wells Fargo bond Property taxes on her home Before deciding to open the Art store, Tara had considered opening an Applebees and had incurred research costs of Paid investment advisor fees f Due to the stress of opening her own business, Tara booked herself into Paso Robles for some much needed relaxation Cosmetic surgery (eye lifh and nose job). Tara believes this is a business expense as she has to look good for her clients ,000 2,000) 50,000 6,000) (12.000) (25,000) (16,000) Entertaining her largest client she incurred the folowing costs: Cab fare Dinner restaurant Tip to waiter Tickets to Giants Game 35 100 A 8 C D What is Tara's net business income for the year? What is Tara's adjusted gross income for the year? What is Tara's taxable income for the year? What is Tara's net tax liability for the year? (ignore AMT