Robert Lento, the sole proprietor of a consulting business, has gross receipts of $600,000 in 2016. Expenses paid by his business are:
Advertising ..................................................$ 2,500
Employee salaries..........................................150,000
Office rent....................................................24,000
Supplies.......................................................18,000
Taxes and licenses...........................................17,000
Travel (other than meals).....................................3,800
Meals and entertainment.....................................2,400
Utilities..........................................................3,800
Employee health insurance premiums......................6,600
Health insurance premiums for Robert.....................2,200
Robert purchased a new car for his business on May 15 at a cost of $28,000. He also purchased $50,000 of new 5-year equipment and $238,000 of used 7-year fixtures on August 1. Robert drove the car 10,000 miles (8,000 for business and 2,000 personal miles). He paid $200 for business-related parking and tolls. He also paid $1,000 for insurance and $1,200 for gasoline and oil for the new car. He would like to maximize his deductions.
a. What is Robert's net income (loss) from his business?
b. How much self-employment tax must Robert pay?
c. If this is Robert's only source of income, what is his adjusted gross income?