problem1. Hafers, the electrical supply company, sold $3,200 of equipment to Jim Coates Wiring, Inc. Coates signed the promissory note May 12 with 3.75% interest. The outstanding date was August 8. Short of funds, Hafers contacted Charter One Bank on July 9; the bank agreed to take over the note at the 5.05% discount.

What proceeds will Hafers get?

problem2. Ryan is self-employed. This year Ryan used his personal auto for numerous long business trips. Ryan paid $2,050 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $4,500. Throughout the year, he drove his car a total of 17,500 miles (a combination of business and personal travel).

a. Ryan can give written documentation of business purpose for trips totalling 5,250 miles. What business expenditure amount can Ryan deduct (if any) for these trips?

Maximum Deductible Amount:

b. Ryan estimates that he drove roughly 1,915 miles on business trips; however he can only provide written documentation of the business purpose for trips totalling 1,200 miles. What business expenditure amount can Ryan deduct (if any) for these trips?

problem3. Renee manufactured and sold a “gadget,” a specialized asset used by auto manufacturers which qualifies for the domestic production activities deduction. Renee acquired $22,100 in direct expenses in the project, which consists of $1,840 of wages Renee paid to employees in the manufacturing of the gadget.

What is Renee's domestic production activities deduction for gadget in each of the subsequent alternative scenarios?

a. Renee sold the gadget for $37,700 and she reported AGI of $87,250 before considering the manufacturing deduction.

b. Renee sold the gadget for $35,200 and she reported AGI of $6,700 before considering the manufacturing deduction.

c. Renee sold the gadget for $40,500 and she reported AGI of $50,700 before considering the manufacturing deduction.