Question

In: Accounting

Margaret started her own business in the current year and will report a profit for her...

Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows:

Gross income $45,000
Expenses:
Travel $1,000
Contribution to Presidential Election Campaign $100
Transportation
(5,725 miles evenly throughout the year, using standard mileage method)
?
Entertainment in total $4,200
Nine gifts at $50 each $450
Rent and utilities for apartment in total $10,500
(25% is used for a home office)

Complete the table below to determine the net income Margaret should show on her Schedule C.

If an amount is zero, enter "0". If required, round the amounts to the nearest dollar.

Gross income $
Expenses:
Travel $
Political contribution   
Transportation   
Entertainment   
Gifts   
Rent and utilities   
Total expenses $
Taxable business income $

Solutions

Expert Solution

ANSWER

The taxable business income is arrived as below:

Remarks/Explanation
Gross Income 45,000
Expenses:
Travel 1,000 Entire amount used for business purposes can be claimed as deduction.
Political Contribution 0 Political contribution cannot be claimed as business deduction.
Transportation (5,725*54.5/100) 3,120 For the year 2018, deduction of 54.50 cents per
mile can be claimed as business deduction.
Entertainment 0 For the year 2018, no amount of entertainment expenses can be claimed as business deduction.
Gifts (9*25) 225 As per IRS rules, a maximum amount of $25 per gift can be claimed as business deduction.
Rent and Utility (10,500*25%) 2,625 Amount of rent and utilities incurred towards business can be claimed as deduction.
Total Expenses 6,970
Taxable Business Income $38,030

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