Item 1

James Jones is the owner of a small retail business operated as a sole proprietorship. During 2019, his business recorded the following items of income and expense:

  Revenue from inventory sales$147,000Cost of goods sold 33,500Business license tax 2,400Rent on retail space 42,000Supplies 15,000Wages paid to employees 22,000Payroll taxes 1,700Utilities 3,600Required:

  1. Compute taxable income attributable to the sole proprietorship by completing Schedule C to be included in James’s 2019 Form 1040.
  2. Compute self-employment tax payable on the earnings of James’s sole proprietorship by completing a 2019 Schedule SE, Form 1040.
  3. Assume that James’s business is not a service business, and that it has $155,000 unadjusted basis in tangible depreciable property. Calculate James’s 2019 QBI deduction, before any overall taxable income limitation.

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