a. Calculate Melissa’s 2020 taxable income. Please show your work.
b. When you calculate Melissa’s tax liability, are you required to use the tax tables or the tax rate schedules, or does it matter?
c. What is Melissa’s tax liability?
ANSWER:
a. $37,200 = $49,600 − $12,400
b. Taxpayers with income less than $100,000 must use the tax tables.
c. $4,270
99. Betty, age 39, and Steve, age 50, are married with two dependent children. They file a joint return for 2020. Their income from salaries totals $165,000; they receive $1,000 in taxable interest and $2,000 in royalties. Their deductions for adjusted gross income amount to $3,100; they have itemized deductions totaling $41,000. Calculate the following amounts:
a.
Gross income
b.
Adjusted gross income
c.
Itemized deduction or standard deduction amount
d.
Deduction for exemptions
e.
Taxable income
f.
Regular income tax liability from rate schedules
ANSWER:
a.
$168,000 = $165,000 + $1,000 + $2,000
b.
$164,900 = $168,000 − $3,100
c.
$41,000
d.
$0
e.
$123,900 = $164,900 − $41,000
f.
$18,838 = $9,235 + (($123,900 − $80,250) × 22%)
100. Steven, age 35 and single, is a commodities broker. His salary for 2020 is $111,500 and he has taxable interest income of $40,000. He has no deductions for adjusted gross income. His itemized deductions are $31,000. Steven does not have any dependents.
a.
What is the amount of his adjusted gross income?
b.
What are his allowable itemized deductions?
c.
What is his deduction for personal exemptions?
d.
What is his taxable income?
e.
What is his regular tax liability from the tax rate schedules?
ANSWER:
a.
$151,500 = $111,500 + $40,000
b.
$31,000
c.
$0
d.
$120,500= $151,500 − $31,000
e.
$22,999.50 [tax rate schedule: $14,605.50 + [($120,500 − $85,525) × 24%]
101. Nathan is 24 years old, single, and works as an accountant in a salmon cannery in Alaska. His total wages for 2020 were $32,000. Federal income tax of $4,500 was withheld from his wages. His only other income was $260 of interest and he had no deductible expenses.
Calculate the income tax due or income tax refund on Nathan's 2020 individual income tax return. Use the tax formula for individuals and show your work.
ANSWER:
Gross income
$32,260
Deductions for adjusted gross income
0
Adjusted gross income
32,260
Standard deduction
(12,400)
Taxable income
$19,860
Gross tax liability (from tax table)
$2,188
Tax withheld
(4,500)
Refund due
$(2,312)
102. In 2020, Len has a salary of $40,700 from his job. He also has interest income of $400. Len is single and has no dependents. During the year, Len sold stock held as an investment for a $10,000 loss. Calculate the following amounts for Len:
a.
Adjusted gross income
b.
Standard deduction
c.
Taxable income
d.
Tax liability
e.
Explain the tax treatment of the loss from the stock sale
ANSWER:
a.
$38,100 = $40,700 + $400 − $3,000
b.
$12,400
c.
$25,700 = $38,100 − $12,400
d.
$2,890 (tax table)
e.
Up to $3,000 of net capital loss per year can be deducted from ordinary income; the unused portion of $7,000 is carried forward.
103. Roger, age 39, and Lucy, age 37, are married taxpayers who file a joint income tax return for 2020. They have gross income of $26,100. Their deductions for adjusted gross income are $550 and they have itemized deductions of $5,400. If Roger and Lucy have no dependents for 2020, calculate the following amounts:
a.
Their adjusted gross income
b.
The greater of the amount of their standard deduction or their itemized deductions
c.
Their taxable income
ANSWER:
a.
$25,550 = $26,100 − $550
b.
$24,800
c.