Question: Robert, the Sole Proprietor of a consulting business, has gross receipts of $500,000 in 2006. Expenses paid by his business are:
a. Advertising $ 2,500
b. Employee Salaries 150,000
c. Office Rent 24,000
d. Supplies 18,000
e. Taxes and Licenses 17,000
f. Travel (other than meals) 3,800
g. Meals and Entertainment 2,400
h. Utilities 3,800
i. Employee Health Insurance Premium 6,600
j. Health Insurance Premiums for Robert 2,200
Robert purchased a new car for this business on May 15 at a cost of $28,000. He also Purchased $50,000 of new 5-year equipment and $70,000 of used 7-year fixtures on August 1. Robert drove the new 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.
Q1. What is Robert's net income (loss) from his business?
Q2. How much self-employment tax must Robert pay?
Q3. If this is Robert's only source of income, what is his adjusted gross income?