You are a CPA in a mid-size firm, Angelica Ruggle is your client and has come to you for some tax planning advice to reduce her 2019 income tax liability. Angelica is married and has a 17-year old son, Chucky who is a senior in high school and has no income. She owns Angelica’s Cafe, which she expects to produce taxable income of approximately $120,000 this year. Angelica’s 2019 taxable income is $40,000 without considering the income from the cafe. Angelica tells you that she needs to purchase new kitchen equipment that will cost $25,000. The café is very successful, and she expects its taxable income to be $170,000 in 2020. Her other taxable income is expected to remain at $40,000. Angelia’s after-tax rate of return is 10%. Write a memo to Angelica offering her two options to reduce her taxes. Include a calculation of her current tax liability before the tax savings options. For each recommendation, include a thorough calculation of her tax savings. You may also submit an Excel file to show your calculations.
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