Question

Lyn, a single, self-employed investment counselor who also owns a rental property. This year, she collected $85,000 in fees and paid the following business and personal expenses

Expenses below:
Health insurance premiums (not through an exchange)	$	4,200
Life insurance premiums (whole life)	$	1,900
Books on investing	$	200
Repairs of the rental property	$	450
Advertising for investment clients	$	1,770
State income taxes	$	4,300
Self-employment tax (hint: half is employer share)	$	11,732
Marketing Lunch and Dinners with potential clients	$	500

Home mortgage interest (acquisition debt of $300,000)	$16,640
Real estate taxes	$5,400
State income taxes paid	6,300
Medical expenses (unreimbursed)	1,800
Employee business expenses (unreimbursed)	450
Charitable contributions (cash to their church)	760

Calculate Lin Lee’s adjusted gross income and taxable income?

Answer 1

#ANSWER:

Adjusted gross income = $ 72,514.

Step - By - Step Solution:

	Particulars	Amount ($)
	Fee collected (A)	85,000
	Less: Expenses:
	Health insurance (1)	4,200
	Books on investing (2)	200
	Repairs of the rental property (3)	450
	Advertising for investment clients (4)	1,770
	50% of self employment tax (11,732 x50%) (5)	5,866
	Total expenses (B)= (1+2+3+4+5)	12,486
	Adjusted Gross Income (A - B)	72,514

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