Any federal self-employment tax implications

Assignment Help Financial Accounting
Reference no: EM13790303

John Smith, age 31, is single and has no dependents. At the beginning of 2014, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and his business is located at 381 State Street, Lindon, UT. The ZIP Code for both addresses is 84042. John’s Social Security number is 111-11-1111, and the business identification number is 11-1111111. John is a cash basis taxpayer.

During 2014, John reports the following items in connection with his business.

Fee income for services rendered $460,000

Building rental expense 36,000

Office furniture and equipment rental expense 9,000

Office supplies 2,500

Utilities 4,000

Salary for secretary 34,000

Salary for equipment operators 42,000

Payroll taxes 7,000

Fuel and oil for the equipment 21,000

Purchase of three new front-end loaders on January 15, 2014, for $550,000.

Purchase of a new dump truck on January 18, 2014   80,000

During 2014, John recorded the following additional items.

Interest income from First National Bank   $10,000

Dividends from ExxonMobil   9,500

Quarterly estimated tax payments   11,500

John does not claim any available additional first-year depreciation.

On October 8, 2014, John inherited IBM stock from his Aunt Mildred. John had been her favorite nephew. According to the data provided by the executor of Aunt Mildred’s estate, the stock was valued for estate tax purposes at $110,000. John is considering selling the IBM stock for $125,000 on December 29, 2014, and using $75,000 of the proceeds to purchase an Acura ZDX. He would use the car 100% for business. John wants to know what effect these transactions would have on his 2014 adjusted gross income.

Write a letter to John in which you present your calculations, and prepare a memo for the tax files. Ignore any Federal self-employment tax implications.

Reference no: EM13790303

Questions Cloud

Predetermined rate was based on a cost formula : Westan Corporation uses a predetermined overhead rate of $22.30 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $267,600 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-..
Do you agree with the court that such a rule is needed : What is the exclusionary rule, and what was the court's purpose in creating it? Do you agree with the court that such a rule is needed? Is the exclusionary rule still relevant in light of the deterrent of civil liability for police officers
Difference between direct materials and direct labor : What is the difference between direct materials and direct labor? What is manufacturing overhead?
Exceptions to the hearsay rule of confessions : Discuss in detail the exceptions to the hearsay rule of confessions, admissions, spontaneous and excited utterance, dying declaration and former testimony. Identify one of the Saint Leo Core values and apply it to the discussion
Any federal self-employment tax implications : John Smith, age 31, is single and has no dependents. At the beginning of 2014, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and his business is located at 381 State Street, Lindon, ..
Describe and discuss visible street robberies : Describe and discuss visible street robberies. Describe and discuss when purse snatching becomes a robbery. Identify one of the Saint Leo Core values and apply it to the discussion
Making use of the capital asset pricing model : Making use of the Capital Asset Pricing Model, compute the cost of Common equity assuming a risk free rate of 2%, a market rate of 5 % and an assumed beta of 1.5.
What is the mechanism of injuries of shaken baby syndrome : What are the elements of the crime of burglary? What is the mechanism of injuries of Shaken Baby Syndrome
Classified as direct labor : Which of the following is not classified as direct labor?

Reviews

Write a Review

 

Financial Accounting Questions & Answers

  Prepare journal entries to record the following

prepare journal entries to record the following merchandising transactions of sheng company which applies the perpetual

  Briefly discuss the operating performance and financial

Briefly discuss the operating performance and financial position of Sepracor. Industry averages for these ratios in 2007 were: ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis would you make an investment in the compa..

  Major changes have occurred for financial reporting for

major changes have occurred for financial reporting for business combinations. these changes are documented in sfas no.

  Illustrate what is meant by earnings persistence

Illustrate what is meant by "earnings" persistence? Why might an analyst be interested in examining the earnings persistence of a company?

  Planning budget for may - prepare a flexible budget

During May, the company's activity was actually 105 diving-hours. Prepare a flexible budget for that level of activity - Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area

  Prepare the statement of financial position

Prepare the statement of financial position, statement of profit or loss and other comprehensive income and statement of changes in equity of Amanah Ltd for the year ended 31 December 2013 in accordance with the requirements of AASB101.

  Prepare a schedule reflecting a ratio analysis of company

Prepare a schedule reflecting a ratio analysis of each company. Compute all ratios from the module for which you have enough data.

  Retained earnings as well as credit to accounts receivable

To write-off an AR account between afilliates, the journal entry, before consolidating, in the books of the company carrying the accounts receivable, would be debit to retained earnings as well as credit to accounts receivable? If not, what would ..

  What items in a physician practice can be depreciated

What is the relationship between inventory and cost of goods sold by a pharmacy or medical supply business? Explain the depreciation concept. What items in a physician practice can be depreciated? What is the purpose?

  Advantages and disadvantages of simulation models

Write a report to your manager advising the advantages and disadvantages of simulation models

  Stone interior decorating company

Established an enterprise called the STONE INTERIOR DECORATING COMPANY

  Show the proper accounting treatment of the 273000 714000 -

show the proper accounting treatment of the 273000 714000 - 441000 by which the cost of first machine exceeded the cost

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd