This year Jack intends to file a married-joint return with two dependents. Jack

Question

This year Jack intends to file a married-joint return with two dependents. Jack received $175,400 of salary and paid $5,350 of interest on loans used to pay qualified tuition costs for his dependent daughter, Deb. This year Jack has also paid qualified moving expenses of $8,150 and $28,700 of alimony. (Do not round intermediate calculations.)

A. What is Jack's Adjusted Gross Income? Assume that jack will opt to treat tax items in a manner to minimize his AGI.

B. Suppose that jack also reported income of $11,800 from a half share of profits from a partnership. Disregad any potential self-employment taxes on this income. What AGI would jack report under these circumstances? Again, assume that Jack will opt to treat tax items in a manner to minimize his AGI.

Explanation / Answer

Jack's AGI is computed as follows :

Salary 175400

Less: moving expenses 8150

Less: alimony 28700

Modified AGI 138550

Student loan interest deduction 2042

AGI 136508

Jack is allowed to deduct part of student loan because AGI is 138550 not above 150000. The maximum discount of 5350 is being phase out ratably over 30000 range beginning with modified AGI of 120000. So jack student loan interest deduction =(5350-(5350*((138550-120000)/30000)))=2042

Part B

Salary 175400

Add: partnership income 11800

Less: moving expenses 8150

Less : alimony 28700

Modified AGI 150350

Student loan interest deduction 5350

AGI 145000

He is allowed deduct entire interest because his modified AGI is above 150000

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