Martha is single and self-employed realtor and is 42 years old. Her rental income is $60,000 on residential building and $80,000 on her office building. She pays $750 for health insurance.

Martha drove her personal car 16,600 miles for business purposes and incurred $240 in parking fees, $310 in highway tolls, and $350 for automobile insurance premiums. Compute Martha's deduction for automobile expenses on her current year tax return, assuming all of the above expenses are valid (standard mileage allowance method ).

Martha, a realtor, paid $5,000 to Walton Way Apartments, Inc. as a referral fee for referring customers to her. One of her competitors complained to the local Realtor's Board that these payments were "kickbacks," deemed unethical conduct by the Board. The Board agreed with her competitor, but noted that the payments were not illegal under federal law, and local laws against such fees have not been enforced for several years. Thus, the Board indicated that it would write a letter to Martha explaining its view that the payments are unethical, but that there was really little else that either it or the competitor could do. Martha countered to the Board that she would prefer not to make the payments, but that such payments are a common practice among realtors in the city, and that her business would suffer if she did not make them as well. (Can Martha deduct the payments on her federal income tax return?)

Martha travels from Augusta to Cleveland on a business trip. Three days of the trip are spent conducting business activities and one day is spent on personal sightseeing activities. Martha incurs $900 in airfare costs in going to and returning from Cleveland and $180 a day in expenses for qualified meals and lodging while in Cleveland.

Martha has the following items:

a.     A $3,000 loss on the sale of a personal sailboat.

b.     Interest expense of $8,000 on money borrowed to purchase tax-exempt securities.

c.     A $6,000 unrealized decline in the value of stock held in an individual's investment portfolio.

d.     Payment of a $100 speeding fine related to a trade or business.

e.     A cost of $145 for having a federal income tax Schedule C prepared by an accountant (the business portion).

f.      A legal fee of $890 for estate planning advice of which 50 percent related to tax planning advice. (personal)

Compute regular MACRS depreciation for the following qualified assets. (Ignore bonus depreciation and Section 179.)

a.     Business equipment purchased in February for $35,000 which has a salvage value of $5,000.

b.     Apartment building (residential real estate) purchased in January for $280,000 with a salvage value of $20,000.

c.     Office building purchased in October 2021 for $90,000 which has a salvage value of $10,000.

1. What is her taxable income? (Ignore Qualified Business Deduction but not self-employment taxes.)

2. What are her taxes due (refund) if she has prepaid $31,000?

Answer rating: 100% (QA)

In the given case the Income is Business Income ... View the full answer