Sandra has her own business and uses the cash basis method of accounting with a December 31, 2020 year-end. She has gross income for the year of $75,000 and total expenses, except for rent, of $40,000. She pays $4,000 a month for rent and on December 1, 2020 decides to pay the first 4 months of 2021 in advance, so that her total rent paid in 2020 is $16,000. What is Sandra's taxable income from her business for 2020?

a. $75,000

b. $23,000

c. $19,000

d. $40,000

Which statement is correct regarding methods of accounting?

a. The accrual method requires income to be recognized when money is received.

b. The business may change accounting methods on its tax return anytime.

c. The cash method requires the deduction of expenses when all activities related to the expense have been performed.

d. The business must make an election for its overall method of accounting when filing its first tax return.

Which of the following items may not be subject to the self-employment tax?

a. A partner's distributive share of partnership business income from a law partnership.

b. Amounts paid to a consultant who is the sole proprietor of his company.

c. Amounts received by an author as royalties from a book he wrote.

d. Amounts paid to an independent contractor who is the sole proprietor of his company.

e. Rental income from apartments owned by an individual whose regular source of income is wages and salaries.