Melinda and Bill are married and file a joint return. Melinda owns an unincorpor
ID: 2446769 • Letter: M
Question
Melinda and Bill are married and file a joint return. Melinda owns an unincorporated dental practice. Bill works part-time as a substitute high school computer science teacher. He spends the rest of his time caring for their daughter. During 2014, they reported the following items of income and expense on their federal income tax return:
Bill’s salary $ 18,000
Interest earned on a savings account 1,200
Interest paid on their personal residence 7,100
Itemized deductions for state and local taxes 3,400
Items relating to Melinda’s dental practice
Revenues 65,000
Payroll and salary expense 49,000
Supplies 17,000
Rent 16,400
Advertising 4,600
Depreciation 8,100
(a) What is Melinda’s and Bill’s taxable income or loss for the year?
(b) What is Melinda’s Net Operating Loss for the year?
*** Can you please explain how you reach the answer as I would like to gain an understanding how to get there?
Explanation / Answer
(a) Melinda’s and Bill’s taxable income or loss for the year Bill’s salary $ 18,000 18000 Interest earned on a savings account 1,200 1200 Interest paid on their personal residence 7,100 -7100 Melinda's loss in dental practice -30100 Standard deduction 12400>3400 -12400 Taxable Income -30400 ie. NIL (b) Melinda’s Net Operating Loss for the year Revenues 65000 Payroll and salary expense 49000 Supplies 17000 Rent 16400 Advertising 4600 Depreciation 8100 95100 Net Loss -30100