[SoCalCPA]

I understand the concept of individual taxation, but I find correctly presenting the answers difficult for Becker simulations. I will describe below, and any help would be much appreciated. Thanks!

Q) Determine the amount of gross income to be reported on the individual income tax return and indicate the amount excluded if any.

Case 1: Schedule C revenues of $50K, COGS $10K, Supplies $1K, Business meals $4K, FICA taxes $2.6K and salary to the sole proprietor $25K.

Answer per Becker: Included = $37K, Excluded = $5.2K (FICA tax, it states salary is a draw as it is not a deduction)

My answer: Included = $37K (50 – 10 – 1 – 2), Excluded = ?? ( no idea)

– I actually do not understand this question, so explanation would be really helpful 🙂

Case 2: Loss of $25K on a rental property that the taxpayer manages part time (AGI = $110K)

Answer per Becker: Included = $20K, Excluded = 5K

My answer: Included = (20K), Excluded = (5K)

– I thought it should be presented as negative, because it is a loss. As such, loss would translate to a negative adjustment on the 1040 right? But, becker shows as positive amounts.

Thank you for your help!

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[SoCalCPA]

sorry, but bump 🙂

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[hopeful_cpa]

What I can make of this is that the 5.2k is the FICA taxes (2.6k x 2) that needs to be excluded because since he/she is self employed he/she needs to pay for both the employer and employee portions.

The reason the answer for case 2 is not in () is because the case already states its a Loss to begin with, therefore they are just looking for a numerical amount without the () or – because Loss is already assumed in the answer.

Just for my own knowledge since I am taking the exam tomorrow, is the rule 50% of any amount over 100k phased out at 150k for rental property which is actively managed?

If I am wrong, please correct me, but this is what I made of the questions.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[SoCalCPA]

Nice, I see your point. Do you know what happens to the salary for case #1? Where would the salary to the sole proprietor be posted? (Form 1040??)

And I believe you are correct hopeful, unless the person is a Realtor.

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[hopeful_cpa]

the realtor part i am not sure of but the salary i believe would be posted under regular income or w2 income with his pay stubs… i believe its at the top of page one on the 1040.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

In case #1 the salary is excluded along with the FICA because the sole prop gets taxed on his net earnings. His draw (salary) doesn't count as an expense. You can only count salary expense of non-owners. He doesn't get a W2 nor a 1099. His income rolls to the face of the 1040 on his Sch C income. I have no idea on the second case.

[Author]

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