taxable income

a360_problems_mod03.xlsx

PR 3-1

Anthony and Latrisha are married and have two sons, James, age 25 and Jonas, age 13. Both sons are properly claimed as dependents. Anthony and Latrisha's marginal tax rate is 25% in the current year and they file a joint return. Both James and Jonas had part-time jobs as well as some unearned income. Below is a summary of their total income.
		James	Jonas
	Wages:	$ 2,800	$ 400
	Taxable interest:	1,800	2,000
Required:
Compute the taxable income and tax liability for James and Jonas.
Solution
Tax Formula for Individuals (Simplified): James				Tax Formula for Individuals (Simplified): Jonas

In the following situations, indicate whether the taxpayer qualifies as a head of household and whether it is advantageous to use the head of household filing status. If the head of household filing status is not available, please explain why.
								Solution
a. Allen is divorced from his wife. He maintains a household for himself and his dependent mother.
b. Beth is divorced from her husband. She maintains a home for herself and supports an elderly aunt who lives in a retirement home.
c. Cindy was widowed last year. She maintains a household for herself and supports her dependent daughter, who lived with her during the year.
d. Doug is not divorced but lived apart from his wife for the entire year. He maintains a household for himself and his dependent daughter. He does not receive any financial support from his wife.

Which tax form is used by the following individuals? Choose the simplest form available and explain why this is the best option.
								Solution
a. Anita is single, age 68, and has a salary of $22,000 and interest of $300.
b. Betty owns an apartment complex that produced rental income of $36,000. Expenses totaled $38,500.
c. Clay's wife died last year. He qualifies as a surviving spouse. His salary is $24,000.
d. Donna is a head of household. Her salary is $27,000 and she has $200 of interest income.

Tax Formula for Individuals
Income from whatever source derived:
		$ - 0
		- 0
		- 0
Total income		- 0
Minus: Exclusions
	- 0
	- 0
	- 0
	- 0	- 0
Gross Income		- 0
Minus: Deductions for adjusted gross income (AGI)
	- 0
	- 0
	- 0
	$ - 0
	- 0	- 0
Adjusted gross income (AGI)		- 0
Minus: Deductions from adjusted gross income (AGI)
	- 0
	- 0
	- 0
	$ - 0
	- 0	- 0
Taxable income		- 0
Gross income tax (Use current year tax table)		- 0
Minus: Payments
	- 0
	- 0	- 0
Net income tax payable or (refund due):		$ - 0

Child's Net Unearned Income Worksheet
Unearned Income
				$ - 0
				- 0
				- 0
Total income				- 0
Less: Statutory deduction				- 0
Less:
Greater of standard deduction of $950 or
Intemized deductions directly connected with the
production of the unearned income				- 0
Net unearned income				$ - 0