Question

Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Karl lives with Ashley, and she fully supports him. Bill spent 2018 traveling in Europe and was not a college student. He had gross income of $4,655 in 2018. Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2018, and many of her expenses were not reimbursed by her health insurance.

Ashley owns Panda Enterprises LLC (98-7654321), a data processing service that she operates as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2018 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses (before the 50% reduction) of $22,000, and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year.

Ashley has an extensive stock portfolio and has prepared the following analysis:

Stock   Number of Shares   Date Purchased   Date Sold   Per-Share Cost   Per-Share Selling Price   Total Dividends
Beige   10   10/18/17   10/11/18   $80     $ 74     $30
Garland   30   10/11/11   10/11/18   43   157   70
Peach   15   3/10/18   8/11/18   62   33   45
Note: Ashley received a Form 1099–B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2018, and these are both ordinary dividends and qualified dividends.

Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband. His Social Security number is 123-45-6788.

Ashley itemizes her deductions and provides the following information, which may be relevant to her return:

Item   Amount   Comment
Unreimbursed medical expenses for Ashley   $11,786     Does not include health insurance premiums.
State income taxes paid   1,830  
Real property taxes on personal residence   3,230  
Interest paid on home mortgage (Form 1098)   8,137   The loan is secured by the residence and was incurred when the home was purchased.
Charitable contributions   1,399   $940 cash payments to Ashley’s church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expenditures.
Sales taxes   619   Amount per sales tax table.

Ashley made a $26,000 estimated Federal income tax payment, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2019 taxes.

Compute Ashley’s net tax payable or refund due for 2018. If you use tax forms for your computations, you will need Form 1040 and its Schedules 1, 4, 5, A, C, D, and SE and Form 8949. Ashley qualifies for the § 199A deduction for qualified business income. Be sure to include that in your calculations. Suggested software: ProConnect Tax Online.

Forms to include: 1040 pages 1 and 2; Schedules 1, 4, 5, A, C, D; Form 8949 Part 1(B) and Part 2(E); Schedule SE p. 1; worksheet line 11a.

Check Figures:         

            Adjusted gross income                   81,524                        Itemized         19,809

            Taxable income                                            49,986           QBI deduction 11,729

Answer 1

Determine the income tax return: Amount Amount Particulars Amount Ashley Son's income $4,655 Bussiness Income Revenue Office expenses Employee salary Employee pay roll $315,000 $66,759 S63,000 S3,560 taxes Meal & Entertain ment $11,000 Office rent Equipment rent Net Profit from bussiness Income from Share activities (2) Interest Income Ohio Bonds Saving Bank account Total Income Less deductions Health insurance premium Alimony to former husband $30,000 $4,000 $178,319 $136,681$136,681 S3,070 $800 $600 $1,400 $141,151 $23,000 $25,000

Un reimbersed Medical expenses State income tax Real property tax Intt paid on Home Mortgage Amount paid to church Sales tax $1,786 $1,830 $3,230 S8,137 $940 $619 total deduction Taxable income Standard deuction Net Income |Таx @ 25% Less: Tax paid Refund $64,542 $64,542 $76,609 S7,750 $68,859 $17,215 S30,000 $12.785 Therefore, the refund amount is S12,785 1) The bill income is not included in the income of "A", because the number of years of bill is more than 19 years

2) Working notes: Determine the amount of net income: Net income Profit of "G" - Loss of "P" - Loss of "B" = S3,490-$390-$30 =$3,070 Therefore, the amount of net income is $3,070 Determine the profit or loss for "B" Profit or loss "B" Purchase cost - Selling cost - Dividend = (10 sharesx $80) -(10 shares x $74) - $30 = $800-740-30 = $30 Therefore, the loss of "B is-$30

Determine the profit or loss for "G" Profit or loss "G" Purchase cost -Selling cost - Dividend (30 shares x $43) - (30 shares x $157) -$70 = ($1, 290- $4,710) - 70 =-S3,420 S70 = S3,490 Therefore, the profit of "G" is $3,490 Determine the profit or loss for "P" Profit or loss "P" = Purchase cost -Selling cost - Dividend (15 shares x $62)- (15 sharesx $33)- $70 (S930- $49545 =S435- S45 =-S390 Therefore, the loss of "P" is-S390