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 ($23,150 × 92.35% × 15.3%)$ 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 × 10%) + [($10,505 – $8,700 = $1,805) × 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


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