Tom Thumb a sole proprietor is budgeting for the coming
Tom Thumb, a sole proprietor, is budgeting for the coming year. He will start the year with a $ 50,000 balance in his capital account. During the year Tom anticipates that he will withdraw $ 30,000 from the business for living expenses. However he anticipates a tax refund in May so he will contribute $ 20,000 to the business at that time. Tom predicts that the business income for the year will be $ 120,000. What is the estimated balance in Tom’s capital account at the end of the year? How much will Tom report on his Form 1040 for tax purposes?
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