Question

LORELAI OPENED A BED AND BREAKFAST IN 2014. USE THE INFORMATION GIVENBELOW TO CALCULATE THE INFORMAITON NEEDED TO COMPLETE LORELAI’S SCHEDULE C.

SEPARATE INTO INCOME AND EXPENSE CATEGORIES

 SHE HAD INCOME OF $210,000 IN 2018.

 SHE PAID $375 FOR A 2-DAY BOOKKEEPING SEMINAR IN OKLAHOMA CITY TO HELP WITH

CREATING HER FINANCIAL STATEMENTS.

 SHE PAID $1,300 FOR A SIX-DAY COURSE "HOTEL MANAGEMENT 101" (QUALIFIED

BUSINESS EXPENSE) FOR HERSELF AND HER BUSINESS PARTER/CHEF SOOKIE. THE COURSE WAS HELD IN NEW YORK CITY (LORELAI PAID $650/EACH FOR AIRLINE TICKETS) AND SPENT 9 DAYS IN TOWN (6 FOR THE COURSE AND 3 SIGHTSEEING). DURING THE TRIP, LORELAI SPENT $275/PERSON/NIGHT ON HOTEL, $65/PERSON/DAY ON MEALS, AND $25/DAY ON A RENTAL CAR.

 SHE HIRED TWO EMPLOYEES. SHE PAYS MICHELE $25/HOUR AND HER DAUGHTER RORY $32/HOUR. EACH WORKED 100 HOURS DURING 2018. LORELAI PAYS THE EMPLOYER PORTION OF FICA TAXES FOR BOTH EMPLOYEES.

 SHE PAYS MERRILL LYNCH TO MANAGER HER INVESTMENT PORTFOLIO. IN 2018 SHE EARNED TAXABLE INTEREST INCOME OF $3,000 AND TAX-EXEMPT INTEREST INCOME OF $3,500. SHE GENERATED $750 OF INVESTMENT INTEREST EXPENSES ASSOCIATED WITH THESE TWO ACCOUNTS.

 SHE DONATED $1200 TO THE PRESIDENTIAL CAMPAIGN.

 SHE PAID $8,500 (IN ADDITION TO MEALS IN NEW YORK CITY) FOR BUSINESS RELATED

MEALS.

 SHE USED HER PERSONAL CAR FOR BUSINESS PURPOSES. SHE DROVE A TOTAL OF

26,750 MILES IN 2018. 9,500 MILES WERE BUSINESS MILES. ACTUAL EXPENSES FOR THE CAR TOTALED $9,250. THE STANDARD MILEAGE RATE IN 2018 IS 54.5 CENTS PER MILE.

 SHE PURCHASED AN 18-MONTH INSURANCE POLICY FOR $3,200 THAT COVERS HER BUSINESS PROPERTY FROM ACCIDENTS AND CASUALTIES FROM JULY 1, 2017 TO DECEMBER 31, 2018.

Answer 1

	$	$	$
Income			210000
Expenses
Vehicle expenses		5177.50
(9500 miles x 54.5)
Insurance premium		2133.33
(for 12 months)
Car rental		150
25 x 6
Expenses for travel and lodging
650 x 2 =	1300
275 x 2 x 6 =	3300
Seminar and course fees
375+1300	1675	6275
Business meals		4640
50% of (8500+ (65 x 2 x 6))
Salaries and wages		5700
(25+32) x 100
			24075.83
Net Profit			185924.17

The above calculation can be used for Schedule C

* Note

1. Donation is not an allowable expense

2. Investment is not related to business