ADMS 3520 Lecture Notes - Lecture 8: Thout, Alliance For Direct Democracy In Europe, Corporate Tax
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Note: This problem is for the 2018 taxyear.
Janice Morgan, age 24, is single and has no dependents. She is afreelance writer. In January 2018, Janice opened her own officelocated at 2751 Waldham Road, Pleasant Hill, NM 88135. She calledher business Writers Anonymous. Janice is a cash basis taxpayer.She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her SocialSecurity number is 123-45-6789. Janice's parents continue toprovide health insurance for her under their policy. Janice wantsto contribute to the Presidential Election Campaign Fund.
During 2018, Janice reported the following income and expenseitems connected with her business.
Income from sale of articles | $85,000 |
Rent | 16,500 |
Utilities | 7,900 |
Supplies | 1,800 |
Insurance | 5,000 |
Travel (including meals of $1,200) | 3,500 |
Janice purchased and placed in service the following fixedassets for her business. Janice wants to elect immediate expensingunder § 179, if possible.
- Furniture and fixtures (new) costing $21,000 on January10.
- Computer equipment (new) costing $12,400 on July 28.
Janice’s itemized deductions include:
State income tax | $2,950 |
Home mortgage interest paid to First National Bank | 6,000 |
Property taxes on home | 2,500 |
Charitable contribution to her alma mater, State College | 1,200 |
Janice did not keep a record of the sales tax she paid. Theamount from the sales tax table is $437.
Janice reports interest income of $4,000 on certificates of depositat Second National Bank. She made estimated tax payments of $3,000for 2018.
Required:
Compute Janice Morgan’s 2018 Federal income tax payable (or refunddue) by providing the following information that would be reportedon Form 1040 and Schedules A, B, C, and SE.
- Make realistic assumptions about any missing data.
- If an amount is zero, enter "0".
- Enter all amounts as positive numbers.
- When computing the tax liability, do not round your immediatecalculations.
- If required, round your final answers to the nearestdollar.
-
Provide the following that would be reported on Janice's Form1040:
1. Filing status: The taxpayers' filingstatus:
2. Calculate taxable gross income.
$3. Calculate the total adjustments forAGI.
$4. Calculate adjusted gross income.
$5. Calculate the greater of the standarddeduction or itemized deductions.
$6. Calculate the qualified busies incomededuction.
$7. Calculate total taxable income.
$8. Calculate the income tax liability.
$9 Calculate SE taxes due.
$10. Calculate the total tax creditsavailable.
$11. Calculate total withholding and taxpayments.
$12. Calculate the amount overpaid(refund):
$13. Calculate the amount of taxes owed:
$Provide the following that would be reported on Janice'sSchedule A:
1. Calculate the deduction allowed for medicaland dental expenses.
$2. Calculate the deduction for taxes.
$3. Calculate the deduction for interest.
$4. Calculate the charitable deductionallowed.
$5. Calculate total itemized deductions.
$Provide the following that would be reported on Janice's ScheduleB:1. Calculate the interest amount:
$2. Calculate the ordinary dividends:
$Provide the following that would be reported on Janice'sSchedule C:
1. Calculate income from sales:
$2. Calculate total expenses:
$3. Calculate net profit or loss
$ Provide the following that would be reported on Janice's Form4562.Click here to access Exhibit 8.1 and the depreciation tables inthe textbook.
1. Calculate the total deprecation for thefurniture and fixtures:
$2. Calculate the total depreciation for thecomputer equipment.
$Provide the following that would be reported on Janice'sScheduled SE. When computing the self-employment tax liability, donot round your calculations. Round your final answers to thenearest dollar. Use rounded amount when determining the deductionfor self-employment tax.
1. Calculate the self-employmentliability:
$2. Calculate the eduction for self-employmenttax:
$2018 Tax Rate Schedules
Use the 2018 Tax Rate Schedules to compute the tax.
Note: Because the tax rate schedules are used instead of the taxtables, the amount of tax computed may vary slightly from theamount listed in the tables. This variation occurs because the taxfor a particular income range in the tax table is based on themidpoint amount.
2018 Tax Rate Schedules Single—Schedule X Head of household—Schedule Z If taxable incomeis:
Over—But not
over—The taxis: of the amount
over—If taxable incomeis:
Over—But not
over—The taxis: of the amount
over—$0 $9,525 . . . . . . 10% $0 $0 $13,600 . . . . . . 10% $0 9,525 38,700 $952.50 + 12% 9,525 13,600 51,800 $1,360.00 + 12% 13,600 38,700 82,500 4,453.50 + 22% 38,700 51,800 82,500 5,944.00 + 22% 51,800 82,500 157,500 14,089.50 + 24% 82,500 82,500 157,500 12,698.00 + 24% 82,500 157,500 200,000 32,089.50 + 32% 157,500 157,500 200,000 30,698.00 + 32% 157,500 200,000 500,000 45,689.50 + 35% 200,000 200,000 500,000 44,298.00 + 35% 200,000 500,000 . . . . . . 150,689.50 + 37% 500,000 500,000 . . . . . . 149,298.00 + 37% 500,000 Married filing jointly or Qualifyingwidow(er)—Schedule Y-1 Married filing separately—ScheduleY-2 If taxable incomeis:
Over—But not
over—The taxis: of the amount
over—If taxable incomeis:
Over—But not
over—The taxis: of the amount
over—$0 $19,050 . . . . . . 10% $0 $0 $9,525 . . . . . . 10% $0 19,050 77,400 $1,905.00 + 12% 19,050 9,525 38,700 $952.50 + 12% 9,525 77,400 165,000 8,907.00 + 22% 77,400 38,700 82,500 4,453.50 + 22% 38,700 165,000 315,000 28,179.00 + 24% 165,000 82,500 157,500 14,089.50 + 24% 82,500 315,000 400,000 64,179.00 + 32% 315,000 157,500 200,000 32,089.50 + 32% 157,500 400,000 600,000 91,379.00 + 35% 400,000 200,000 300,000 45,689.50 + 35% 200,000 600,000 . . . . . . 161,379.00 + 37% 600,000 300,000 . . . . . . 80,689.50 + 37% 300,000
Title: Business Structure, Liability, and Partnership Agreement Develop a hypothetical business you would consider starting with a friend or relative.Imagine that the friend or relative has sufficient funds to start the business and that you will be doing most of the work (for example, if you were starting a mobile car wash business, you would be procuring the customers and washing the cars). Imagine also that you will be performing all the bookkeeping functions for the business. In a written report, prepare the following:A report to your partner, containing a detailed description of the differences regarding liability with respect to a sole proprietorship, a general partnership, a limited partnership, and a corporation. A completed partnership agreement, including the following elements ready for signatures using the partnership agreement included. |
Example of Partnership Agreement
Detailed description of the business Names of the partners Address of the partnership and the partners Roles of each of the partners as limited partners, being as complete and detailed as possible (you can also be as imaginative as you need to be with titles and responsibilities ) List of assets provided by each partner Division of income Division of partnership liabilities (debts) Method by which the partnership may be dissolved, including what happens in the event of filing for bankruptcy |
(NAME), and (NAME), the below signed hereby enter into this Partnership Agreement on behalf of themselves, their heirs, successors and assigns, and set forth following terms and conditions as constituting the Partnership Agreement in its entirety:
1. The partnership shall go by the following name: (NAME).
2. The partnership's principle place of business shall be (DESCRIBE).
3. The first day that the partnership shall begin business is: (DATE) and it will continue until the partners agree to terminate it or until forced to cease its operations by law.
4. The partnership's operations shall be primarily in the following field or area: (DESCRIBE)
5. The partnership shall be capitalized as follows: For each $ (AMOUNT) (dollars) each partner shall receive (#) shares with contribution being made as follows:
Partner A contributes $(AMOUNT) and shall receive (#) shares, the same being (#) % of the total shares available. Partner B contributes $(AMOUNT) and shall receive (#) shares, the same being (#) % of the total shares available. 6. Losses and gains on contributed capital and other property shall be assigned as follows: (DESCRIBE)
The IRS's general allocation rule shall apply, and gains and losses shall be allocated according to the % of total capital contributed by each partner as set out in paragraph 5 above.
7. Profits and losses shall be allocated according to the same percentage allocation set forth in paragraph #6 above. 8. Salary, if any, for the services rendered shall be determined by unanimous approval of the partners.
2
Project Partnership Agreement
PARTNERSHIP AGREEMENT
10. Each partner shall maintain both an individual drawing account and an individual capital account. Into the capital account shall be placed that partner's initial capitalization and any increases thereto. The drawing accounts shall be used for withdrawal of amounts, the size of which is limited to $(AMOUNT) on any one day.
11. Adequate accounting records shall be made and maintained. Any partner or his/her agent may review any and all accounting or other records at anytime.
12. The partners designate the following as the Partnership's business and checking accounts into which all the funds of the Partnership shall be placed and maintained: (DESCRIBE)
13. Accounting records and books shall be kept on a (select one) 1. cash basis 2. accrual basis and the fiscal year shall begin on the (#) day of (MONTH) and shall end (#) day of (MONTH).
14. At the close of the fiscal year, there shall be an annual audit conducted by the following accounting firm: (DESCRIBE)
15. The partnership shall dissolve upon the retirement, death, or incapacity of any partner unless the remaining partner elects the option of buying out that partner's share. (DESCRIBE THE DETAILS)
16. Upon termination or dissolution of the Partnership, the Partnership will be promptly liquidated, with all debts being paid first, prior to any distribution of the remaining funds. Distribution shall be made according to the percentage of ownership as set out in paragraph #5 above.
17. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
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Project Partnership Agreement
9. Control and management of the partnership shall be split equally amongst the partners.
So agreed, this (#) day of (MONTH), 20 .
________________________ (NAME) ________________________ (NAME)
Review - make sure the following items are included in this agreement!
Detailed description of the business
Names of the partners
Address of the partnership and the partners
Roles of each of the partners—be as complete and detailed as possible
List of assets provided by each partner
Division of income
Division of partnership liabilities (debts)
Method by which the partnership may be dissolved