Answer the question in the file and Show me how you get the final answerProblem 1 (Use the facts below to answer Problem 1, Questions 1, 2, and 3)Whirlwind Cycles is owned 100% by Daniel, a single taxpayer.Both Whirlwind Cycles and Daniel use the cash method of accounting for tax purposes.The business incurred the following items of income and expense in the year 2019:Cash Sales$250,000Interest received from City of Eugene Bonds4,000Cost of Goods Sold (assume cashpaid in 2019)42,000Cash payments for 2019 utilities4,500Cash payments for 2019 rent ($1,500 per month)18,000Tax depreciation (deductible for tax purposes)30,000Cash contribution to the political party he supports (not deductible for tax purposes)1,000On 1/1/2018 (last year) Whirlwind Cycles purchased a 60-month zero coupon bond with a 4% yield and a $30,000 maturity value for $24,657 (compounded annually).Daniel’s marginal tax rate is 37% (i.e. he has $600,000 of income from other sources) before any profits from the business are considered. (1 point) What is the taxable income of the business assuming it operates as a sole proprietorship (choose the answer within 1 or 2 dollars of your exact answer to allow for rounding differences)? $156,486 $156, 526 $160,526 None of the above (1 point) Calculate the tax liability for the sole proprietorship assuming your answer to part a is $157,000 (i.e. assuming the taxable income of the business is $157,000). Choose the answer within 1 or 2 dollars of your exact answer to allow for rounding differences. $31,855 $27,055 $58,090 None of the above (1 point) Calculate Daniel’s 2019 after-tax cash flows from the business assuming your answer to part B is $32,000 (i.e. assuming the tax liability for the business is $32,000) and Daniel withdraws all after-tax cash flows from the business. $188,500 $156,500 $152,500 None of the above Problem 2 (Use the facts below to answer Problem 2, Questions 1, 2, and 3)Elizabeth, an individual taxpayer, has a marginal tax rate on ordinary income of 32% and a tax rate on long-term capital gains of 15%.She has $100,000 that she wants to invest for the next 6 months, at which time she will liquidate the investment.She is considering three investment alternatives:(1) a corporate bond yielding an annual interest rate of 5% (so 2.5% over 6 months); (2) a municipal bond that pays and annual interest rate of 3% (so 1.5% over 6 months); (3) stock that will pay a dividend of $1000 and is expected to increase in value by 2% per year (so 1 percent after 6 months).Assume that Elizabeth can purchase the stock after the declaration date but before the record date, and that all interest and dividends will be received at the end of the 6 month period. Also assume that the income from the investment does not bump Elizabeth up to the 35% bracket. (1 point) What is the after-tax return Elizabeth earns over the 6 month period if she invests in the corporate bond? 2.5% 2.125% 1.7% 2.0% (1 point) What is the after-tax return Elizabeth earns over the 6 month period if she invests in the municipal bond? 1.5% 1.275% 1.02% 1.2% (1 point) What is the after-tax return Elizabeth earns over the 6 month period if she invests in the stock? 0.68% 0.85% 2% 1.53% Problem 3 (Use the facts below to answer Problem 3, Questions 1, 2, 3, 4, and 5)For each of the following scenarios, determine the amount included in the taxpayer’s gross income for 2019:(1 point) Home Office, Inc., an accrual basis taxpayer, leases a copying machine to a new customer on December 27, 2019.The machine was to rent for $300 per month for a period of 36 months beginning January 1, 2020.The customer was required to prepay 2 months rent at the time the lease was signed on December 27, 2019.The customer was also required to pay a $2,000 damage deposit at the time the lease was signed. Determine the amount of gross income Home Office recognizes in 2019.(1 point) Kathy, an accrual basis taxpayer, operates a gym.She sells memberships that entitle the member to use the facilities at any time.A one-year membership costs $600 ($300/12 = $50 per month); a two-year membership costs $1,152 ($1,152/24 = $48 per month).Cash payment is required at the beginning of the membership.On August 1, 2018, Kathy sold a one-year membership and a two-year membership.Determine the amount of income Kathy recognizes in 2019.(1 point) Ted won a car worth $20,000 on The Price is Right on September 30, 2019. He plans to sell the car next year. How much income does Ted recognize in 2019?(1 point) On January 13, 2019, Jason, a cash basis taxpayer, was one of 3 winners of a $1.6 billion Powerball jackpot. Jason had the option to receive a one-time cash payment of $327.8 million or 30 annual payments of $17.8 million. Jason elected to receive 30 annual payments and received the first payment of $17.8 million on July 1, 2019. How much gross income does Jason have in 2019 as a result of the Powerball winnings?(1 point) On July 1, 2019, Stephanie’s grandmother gave her 2000 shares of Starbucks stock worth $60,000 as a graduation present. Starbucks declared a dividend of 15 cents per share on September 9, 2019, to be paid on November 27, 2019 to shareholders of record as of November 12, 2019. Stephanie still owned all of the stock on December 31, 2019. How much gross income does Stephanie have as a result of the gift and the dividend in 2019?$0$300$600$2,600$631$350$912$1,262$0$10,000$20,000None of the above$0$327.8 million$17.8 million$1.6 billion$0$300$60,000$60,300Problem 4 (use the facts below to answer Problem 4, Questions 1, 2, 3, and 4)On January 1, 2019, Marge made a $80,000 interest-free loan to her son, Steve, who used the money to start a new business. Marge’s sources of income in 2019 were salary of $100,000 and interest income of $4,000 from bonds she owns. Steve’s only sources of income in 2019 were $50,000 from the business and $500 of interest on his checking account.The relevant Federal interest rate was 3%. The full amount of the loan was outstanding at the end of the year. Calculate the effect of the loan on the 2019 taxable income of both the borrower and lender. Consider only the effect of imputed interest from the loan, if any. (1 point) What is the effect of the loan on Marge’s 2019 taxable income? $0$500 increase$2,400 increaseNone of the above (1 point) What is the effect of the loan on Steve’s 2019 taxable income? $0$500 decrease$2,400 decreaseNone of the above(1 point) If the amount of the loan is $150,000 instead of $80,000, what is the effect of the loan on Marge’s 2019 taxable income?$0$500 increase$4,500 increaseNone of the above(1 point) If the amount of the loan is $150,000 instead of $80,000, what is the effect of the loan on Steve’s 2019 taxable income?$0$500 decrease$4,500 decreaseNone of the above