I have a question about one of the Becker MCQ's that I did last night.
Tom and Sharlene had the following items of income and expense during the taxable year:
Self-Employment Activity
Gross income $35,000
Business license fees 500
Marketing Expenses 2,000
Salary paid to Sharlene 10,000
Tom's wages from his Job 67,000
Interest from money market 1,500
Gain from sale of securities owned for 3 months 1,500
What is Tom & Sharlene's gross income before adjustments?
a.$116,000
b.$131,500
c.$128,500
d.$106,000
Now here is the answer:
Explanation
Choice “a” is correct. Tom & Sharlene's gross income is calculated as follows:
Net self-employment income $ 32,500
Tom's wages 67,000
Interest 1,500
Gain from sale 15,000
Total gross Income $ 116,000
Note: Sharlene's salary is not included as income as 100% of the net self-employment activity is taxable to her. Her salary is considered a draw and is not an allowable business deduction against the gross income of the self-employment activity.
Is the Gain in the answer a typo? If not can someone explain why it jumped to $15,000?
REG - 78
BEC - 74, 67, 69, 69, 70, 79
FAR - 76
AUD - 69, 69, 69, 74, 85
Licensed Louisiana CPA
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