Jack, a geologist, had been debating for years whether or not to venture out on his own and operate his own business. He had developed a lot of solid relationships with cllents, and he belleved that many of them would follow him if he were to leave his current employer. As part of a New Year's resolution, Jack decided he would finally do It$.$ Jack put his business plan together, and on January $1$ of this year, Jack opened his doors for business as a C corporation called Geo$-$Jack $($GJ$).$ Jack Is the sole shareholder. Jack reported the following financial Information for the year $($assume GJ reports on a calendar year, uses the accrual method of accounting, and elects to account for inventory$).$

a$.$ In January. GJ rented a small business office about $12$ miles from Jack's home. GJ pald $\backslash$$$13,900,$ which represented a damage deposit of $\backslash$$$5,560$ and rent for two years $(\backslash$$$4,170$ annually$).$

b$.$ GJ eamed and collected $\backslash (\backslash$$ $355,000\backslash )$ performing geological$-$related services and selling its specialized digging tool.

c$.$ GJ recelved $\backslash (\backslash$$ $60\backslash )$ interest from municipal bonds and $\backslash (\backslash$$ $2\mathrm{.}230\backslash )$ Interest from other investments.

d$.$ GJ purchased some new equipment in February for $\backslash (\backslash$$ $49,000\backslash ).$ It clalmed depreciation on these assets during the year in the amount of $\backslash (\backslash$$ $7\mathrm{.}515\backslash ).$

e$.$ GJ pald $\backslash (\backslash$$ $7,650\backslash )$ to buy luxury season tickets for Jack's parents for State Unlversity football games.

f$.$ GJ pald Jack's father $\backslash (\backslash$$ $12,600\backslash )$ for services that would have cost no more than $\backslash (\backslash$$ $7,560\backslash )$ If Jack had hired any other local business to perform the services. While Jack's dad was competent, he does not command such a premlum from his other cllents.

g$.$ In an attempt to get his name and new business recognized, GJ pald $\backslash (\backslash$$ $7,650\backslash )$ for a one$-$page ad in the Geologic Survey. It also pald $\backslash (\backslash$$ $16\mathrm{.}300\backslash )$ in radio ads to be run through the end of December.

h$.$ GJ leased additional office space In a bullding downtown. GJ pald rent of $\backslash (\backslash$$ $30,250\backslash )$ for the year.

I. In November, Jack's office was broken Into and equipment valued at $\backslash (\backslash$$ $5\mathrm{.}650\backslash )$ was stolen. The tax basis of the equipment was $\backslash (\backslash$$ $6,150\backslash ).$ Jack recelved $\backslash (\backslash$$ $2,260\backslash )$ of insurance proceeds from the theft.

J$.$ GJ Incurred a $\backslash (\backslash$$ $4,325\backslash )$ fine from the state government for digging in an unauthorized digging zone.

k$.$ GJ contributed $\backslash (\backslash$$ $3,260\backslash )$ to lobbylsts for thelr help in persuading the state government to authorize certaln unauthorized digging zones.

I. On July $1,$ GJ pald $\backslash$$$1,800$ for an $18-$month Insurance policy for its business equipment. The policy covers the perlod July $1$ of this year through December $31$ of next year.

m$.$ GJ borrowed $\backslash (\backslash$$ $20,000\backslash )$ to help with the company's initial funding needs. GJ used $\backslash (\backslash$$ $2,000\backslash )$ of funds to invest in municipal bonds. At the end of the year, GJ pald the $\backslash (\backslash$$ $1,200\backslash )$ of interest expense that accrued on the loan during the year.

n$.$ Jack lives $12$ miles from the office. He carefully tracked his mileage and drove his truck $6280$ miles between the office and his home. He also drove an additional $7200$ miles traveling between the office and client sites. Jack did not use the truck for any other purposes. He did not keep track of the specific expenses assoclated with the truck. However, while traveling to a client site, Jack recelved a $\backslash (\backslash$$ $215\backslash )$ speeding ticket. GJ relmbursed Jack for business mileage and for the speeding ticket

o$.$ GJ purchased two season tickets $(20$ games$)$ to attend State University baseball games for a total of $\backslash$$$1,360.$ Jack took existing and prospective cllents to the games to maintaln contact and find further work. Thls was very successful for Jack as GJ galned many new projects through substantial discussions with the cllents following the games.

p$.$ GJ pald $\backslash (\backslash$$ $3,760\backslash )$ for meals when sales employees met with prospective clients.

q$.$ GJ had a cllent who needed Jack to perform work in Florlda. Because Jack had never been to Florlda before, he booked an extra day and night for sightseelng. Jack spent $\backslash (\backslash$$ $530\backslash )$ for alfare and booked a hotel for three nights $(\backslash (\backslash$$ $185\backslash )$ per night$).($Jack stayed two days for business purposes and one day for personal purposes.$)$ He also rented a car for $\backslash (\backslash$$ $110\backslash )$ per day. The cllent provided Jack's meals while Jack was doing business, but GJ pald all expenses.

r$.$ GJ pald a total of $\backslash (\backslash$$ $23,000\backslash )$ of wages to employees during the year, and cost of goods sold was $\backslash (\backslash$$ $28,000\backslash ).$

Required:

a$.$ What is GJ$\text{'}$s net business income for tax purposes for the year?

The previous answer of $230,765$ is incorrect