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Individual Tax Return with Sole Proprietorship

   

Added on  2019-09-13

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INDIVIDUAL TAX RETURN WITH SOLE PROPRIETORSHIPNote that this example is for tax year 2015 because the 2016 tax forms have not yet beenreleased by the IRS.FactsWilliam and June Spicer have two dependent children, Sophie age 9 and Carl age 7, both ofwhom live at home. (Additional personal data are provided directly on Form 1040.) Williamoperates a gourmet market in Raleigh, Bill’s Market, as an accrual-basis sole proprietorship.The information on gross market sales, expenses, and property transactions is the same asprovided for the regular corporate tax return (Sample Tax Return 1) except that Williamreceives no salary and there is no related FICA tax. This information is as follows:The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August15, 2015. The Market also sold a display case for $1,000 on December 12, 2015, that had cost$12,000 when purchased on June 6, 2011; it had an adjusted basis of $4,000 when sold. Thegains or losses on these asset sales are the same for tax and financial accounting. Thebusiness complies with all Form 1099 requirements.William is also a 10 percent shareholder in Imagineers Corporation, an S corporation, buttakes no active role in the business. He received a Schedule K-1 from this S corporationreporting $1,800 in ordinary business income. June is a general partner in The Bridal ShopPartnership. She worked 3 days a week at the shop and received a Schedule K-1 reporting a$12,000 guaranteed payment and $8,000 in ordinary business income. June paid $3,800 forafter-school and summer child care while she worked.Gross sales ($1,300,000 from credit card sales) $2,700,000Merchandise purchases 1,980,000Expenses:Advertising $40,000Charitable contributions 2,000Cleaning/maintenance 12,000Depreciation (MACRS pre-2015 purchases) 3,000Section 179 expense (2/1/15 display case) 5,000Payroll taxes 18,000Health insurance 15,000*Insurance (excludes health) 18,000Interest expense 1,000Licenses/fees 4,000Meals/entertainment 1,000Office expenses 14,000Rent 120,000Salary/wages 210,000Travel 8,000Utilities 16,000*Includes $3,000 for health insurance for William and his family.The following information pertains to the completion of the Spicers’ personal tax return:Interest income $ 500Dividend income (all qualified) 1,300Unreimbursed doctor’s bills 8,000Unreimbursed hospital bills 9,000
Individual Tax Return with Sole Proprietorship_1

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