# Z is unmarried, claims a dependency exemption

Z is unmarried, claims a dependency exemption for his 18-year-old child who lives with his former spouse, and has the following items of income and expense for his calendar year 2012:Income from sole proprietorship:Gross income\$ 42,600Cash operating expenses\$ 14,500Tax depreciation expense + 4,950(19,450)Net income23,150Interest income\$ 2,540Personal exemption1Dependency exemptions for minor children1Estimated tax payments\$ 5,000Calculate Z’s adjusted gross income, taxable income, gross tax, and tax due or refund. Assume that the combined O.A.S.D.I. and M.H.I, self-employment tax rate is 15.3 percent. Present your answers in good form. Use the tax rate schedules for computing the tax.suggested answerSelf-employment tax (\$23,150 Ã 92.35% Ã 15.3%)\$ 3,271Income from sole proprietorship\$23,150Interest income2,540Deduction for one-half self-employment(1,635)Adjusted gross income\$24,055Standard deduction in 2012(5,950)Personal and dependency exemptions in 2012(7,600)Taxable income\$10,505Federal income tax(\$8,700 Ã 10%) + [(\$10,505 â \$8,700 = \$1,805) Ã 15%)]1,140Estimated tax payments(5,000)Tax due (refund) \$(3,860)please explain what the 92.35% is and what OASDI and MHI is and how the sole proprietor tax is calculated