Question

Tonya operates a nail salon as a sole proprietorship. Tonya also owns and rents an apartment building. This year Tonya had the following income and expenses. Determine Tonya's AGI (rounded to the nearest dollar). You may assume that Tonya will owe $6,255 in self-employment tax on her salon income, with $3,128 representing the employer portion of the self-employment tax. You may also assume that her divorce from Ted was finalized in 2016.

Interest income $ 28,138
Interest expense on qualified loan to fund dependent son's college tuition 2,000
Salon sales and revenue 215,900
Salaries paid to beauticians 113,125
Nail salon supplies 58,500
Alimony paid to her ex-husband, Ted 15,000
Rental revenue from apartment building 78,050
Depreciation on apartment building 32,250
Real estate taxes paid on apartment building 27,750 Real estate taxes paid on personal residence 15,603 Contributions to charity 10,593

Answer 1

Tonya's AGI $70,335

Step-by-step explanation:

Tonya's AGI:

Revenue from salon $215,900

Salaries paid to beauticians ($113,125)

Nail salon supplies ($58,500)

Salon's operating income $44,275

+

Interest income $28,138

+

Rental revenue from apartment building $78,050

Depreciation on apartment building ($32,250)

Real estate taxes paid on apartment building ($27,750)

Rental income $18,050

-

Alimony paid to her husband $15,000

-

Self-employment tax on salon income $3,128

-

Interest expense on education loan $2,000

=

Tonya's AGI $70,335

Real estate taxes paid on Tonya's house and charitable contributions are itemized deductions (below the line deductions).