Question

Maureen’s filing status is head of household. She owns and operates a hardware store, which has the following revenues and expenses for the current year.

                              Revenue                                                                                                               $     300,000

                              Expenses:

                                          Cost of goods sold                                                                              90,000

                                          Property taxes                                                                                     40,000          

                                          Repairs and maintenance                                                                   30,000

                                          Advertising and other costs                                                    20,000

                  During 2020, Maureen received corporate bond interest income of $9,650, qualified dividend income of $8,000, and has net capital gains of $7,000. She has no other items that would affect her adjusted gross income (AGI). Her itemized deductions total $17,000.

                  Required:

a.    Using good form, compute Maureen’s qualified business net income (QBI) generated from her hardware store.

b.    Using good form, compute Maureen’s Modified Taxable Income, and also her QBI deduction for 2020.

                  c.    Assume that Maureen received corporate bond interest income of $47,000, not $9,650; and that itemized deductions total 27,000, not $17,000. Using good form, compute Maureen’s Modified Taxable Income, and also her QBI deduction for 2020.

Answer 1

SOLUTION;-