Question

1. Betty operates a beauty salon as a sole proprietorship. Betty also owns and rents an apartment building. This year Betty had the following income and expenses. Determine Betty’s AGI. You may assume that Betty will owe $2,502 in self-employment tax on her salon income.

                    Interest income                                                                  $ 11,255
                    Salon sales and revenue                                                       86,360
                    Salaries paid to beauticians                                                   45,250
                    Beauty salon supplies                                                            23,400
                    Alimony paid to her ex-husband, Rocky (2016 divorce) 10,000
                    Rental revenue from apartment building                               30,220
                    Depreciation on apartment building                                      12,900
                    Real estate taxes paid on apartment building                       11,100
                    Real estate taxes paid on personal residence                        6,241
                    Contributions to charity                                                           4,237

Answer 1

a.	Interest income	$   11,255
	Salon revenue	$   86,360
	Less: Salaries	$ (45,250)
	Salon supplies	$ (23,400)
b.	Operating income from salon	$   17,710
	Apartment building revenue	$   30,220
	Less: Depreciation	$ (12,900)
	Taxes on apartment building	$ (11,100)
c.	Apartment building income	$      6,220
d.	AGI    (a+b+c)	$   35,185