In 2016, Wilma Way’s sole proprietorship, WW Bookstore, generated $120,000 net profit. In addition, Wilma recognized a $17,000 gain on the sale of business furniture and shelving, all of which was recaptured as ordinary income. The business checking account earned $960 interest income.
a. Which of these income items are subject to self-employment tax?
b. Compute Wilma’s 2016 self-employment tax.
c. Compute Wilma’s 2016 taxable income from her bookstore activity.