Andrew is the sole owner of a small LLC, specializing in manufacturing ready-to-eat ramen noodle packages. Andrew sends you the following income/expenses items a week ago:

• Income from the business: $800 k
• Expenses:
  • Warehouse: $200k purchased on 12/31/2022
  • New production machinery: $100k purchased on 12/31/2022
  • Employee salary: 200k (1 full-time manager = 50k, 15 part-time contractors, 10k each)
  • Andrew needs to meet with a few bosses from HEB and Walmart to advertise his products. Below are the expenses associated with those client meetings that Andrew documented.
    • Diamond Club and Bar tickets for both Andrew and clients = 20k
    • Food and Drinks = 10k
  • Utilities: 30k

1. Assuming there are no depreciation expenses (no 179, no bonus, and no MACRS) in 2022, calculate Andrew's AGI. Show details calculation and explanation.

1. How would your answer in a) change if we now account for asset depreciation expenses? Show details calculation and explanation.

1. Based on the purchase date of the warehouse and the machinery, we observe that Andrew is planning some strategy here to reduce his tax liability in 2022. What is the type of that tax strategy? Explain how it helps Andrew to reduce his tax liability in 2022?

PLEASE DO NOT COPY WORK FROM BELOW< IT IS WRONG!

Transcribed Image Text:

NOV-2018 Ques 9.00 Income from business Expenses i) warehouse 800,000 (2,00,000) 20 chinery = = (1,00,000) = (2,00,000) i) New production mo 11) Employee salary Diamond club and Bar tickets = (20,000) 10.00 (19) o Food and drinks 2 (10,000) 11.00 M Utilities (30000) Total _240000 12 NOON (a) If there i 1.00 then no depreciation crepenses in 2020 Andra's AGI 2.00 b 3.00 4.00 5.00 Ans is 240,000 There is no change i asset depreciation expenses NOV-2018 Ques 9.00 Income from business Expenses i) warehouse 800,000 (2,00,000) 20 chinery = = (1,00,000) = (2,00,000) i) New production mo 11) Employee salary Diamond club and Bar tickets = (20,000) 10.00 (19) o Food and drinks 2 (10,000) 11.00 M Utilities (30000) Total _240000 12 NOON (a) If there i 1.00 then no depreciation crepenses in 2020 Andra's AGI 2.00 b 3.00 4.00 5.00 Ans is 240,000 There is no change i asset depreciation expenses

Answer rating: 100% (QA)

Lets calculate Andrews Adjusted Gross Income AGI without considering asset depreciation expenses fir... View the full answer