Question 1: Annie, a cash method taxpayer, owns a Pho Restaurant in downtown San Antonio. Listening to her business consultant, Annie has formed her restaurant as a 1-member LLC. Annie started her restaurant business in 2015, and so far, it has been performing quite well. In 2022, below are the business items that Annie has forwarded to you. Since Annie has no knowledge in accounting, she just wrote down whatever items that she thinks would be useful for her tax filing.

What is Annies taxable income? Provide detailed explanation and calculation for potential partial credit.

• Income from the Pho restaurant: $500 k

• Expenses:

• Employee salaries: $200 k (4 servers, each $25k, chief = $50k, manager = $50k)

• Food materials: $20k. Annie told you that she pays for the food vendor $20k in March 2022. In return, the vendor will provide food to her weekly from then to the end of 2022 and will not charge her weekly charge for each delivery.

• Rent: $36k (pay on 06/31/2022. The amount is to pay rent for the next 36 months)

• Fines paid: $1k. Annie told you that she had to pay a $1k fine in 2022 for not having a fire extinguisher in the restaurant upon inspection.

• Vehicle: $50k. Annie told you that she bought 2 cars for the business in 2022. The 1st car is a Honda Accord ($25k) which she used to get to work everyday from her home. The 2nd car is a Dodge minivan ($25k) which she used to deliver food from the restaurant.

• Business trip: $10k. According to Annie, every year end, Annie hosts a fully paid traveling trip for all the restaurant employees. Annie believes that since her salary for the staff is not that great, the trip is a crucial part to retain employees.