Question

 

Jay and JoAnn Jefferson are married and have a joint consulting business. The business taxable income of $100,000 for 2016 and they both take $35,000 out of the business to live on and leave $26,000 in the business to expand. Here are the business revenue and expenses:

Consulting revenue $256,000

Salaries expense, employees 100,000

Payroll tax expense 18,000

Owners’ Draw 70,000

Rent expense 12,000

New Computer equipment (total cost) Claim section 179 deduction 10,000

Travel expense 4,000

Health Insurance (employees) 6,000

Health Insurance (owners) 4,000

Meals 1,000

Entertainment 1,000

Supplies 5,000

Assuming Jeff and JoAnn have this same business that they run as a partnership, prepare their joint Federal income tax return for 2018. Assume that they have no dependents, do have insurance coverage, do not have any other income or itemized deductions, and they made quarterly Federal income tax payments totaling $24,000.

Don’t forget to include a standard deduction and personal exemptions.  (They are each under 65 years of age.) You should complete a Schedule E (page 2), Schedules SE, Form 4562, and a Form 1040.

Note: In computing the income distributed on this K-1. There were no salaries only the Line 1 income and the medical insurance paid by the partnership was shown as a guaranteed payment to partners and reported on a separate line. The section 179 depreciation was also reported separately.

Answer 1

		Amount ($)	Amount ($)
Consulting revenue			2,56,000	A
Less: Expenses
Employee Salary		1,00,000
Payroll tax		18,000
Owners Drawl - Not allowable		-
Rent Expenses		12,000
New computer( Claim Section 179)		10,000
Travel Expenses		4,000
Employee Health insurance		6,000
Owners Health Insurance - Not allowable		-
Meal assuming for business purpose		1,000
Entertainment		1,000
Supplies		5,000	1,57,000	B
Gross Taxable Income(A-B)			99,000	C
Less : Standard Deduction			12,600	D
Net Taxable Income			86,400	(C-D)