Assignment: Project Tax Scenario

Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Law Partners, PLLC. She owns and operates a small business called Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane as the sole-proprietor is a material participant in the business. She is a cash basis taxpayer.

Jane lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Jane's Social Security number is 123- 45- 6789. Jane indicates that she wants to designate $ 3 to the Presidential Election Campaign Fund.

During 2013, Jane had the following income and expense items:

a. $ 100,000 salary from Law Partners, PLLC.

b. $ 20,000 gross receipts from her typing services business.

c. $ 700 savings account interest income from Acme National Bank.

d. $ 1,000 Christmas bonus from Legal Services, Inc.

e. $ 60,000 life insurance proceeds on the death of her sister.

f. $ 5,000 check given to her by her wealthy aunt.

g. $ 100 won in a bingo game.

h. Expenses connected with the typing service:

Office rent $ 7,000

Supplies 4,400

Utilities and telephone 4,680

Wages to part- time typists 5,000

Payroll taxes 500

Equipment rentals 3,000

i. $ 9,500 interest expense on a home mortgage ( paid to San Jose Savings and Loan).

j. Legal Services, Inc., withheld Federal income tax of $ 18,000 and FICA tax of $ 5,448 { Social Security tax of $ 4,050 [($ 101,000 - $ 4,580) × 4.2%] + Medicare tax of $ 1,398 [($ 101,000 - $ 4,580) × 1.45%]}.

k. Alimony of $ 10,000 received from her former husband, Ted Smith.

l. Interest income of $ 800 on City of Boca Raton bonds.

n. Jane made estimated Federal tax payments of $ 1,000.

o. Sales taxes from the sales tax table of $ 964.

p. Charitable contributions of $ 2,500.