Larry Johnson, 45 and single, has the following income and deductions in 2016. U
ID: 2527638 • Letter: L
Question
Larry Johnson, 45 and single, has the following income and deductions in 2016. Using the tax rate schedules rather than the tax tables, compute Larry's tax owed or refund due for 2016. Assume dividends are not qualified.
800
In addition, Larry's car (value =$15,000, cost = $20,000) was stolen during the year, and the insurance reimbursement was only $7,000. He also had $2,000 of travel expenses related to his job that were not reimbursed and $3,000 of federal income tax withheld from his salary.
He elects to treat his dividends as net investment income, so they are not subject to the special long-term capital gains tax rates.
Salary $50,000 Interest Income 3,200 Dividends800
Medical Expenses $6,150 Property Taxes on Personal Residence $3,600 Interest on Home Mortgage $7,600 State and local income taxes $2,400 State and Local sales taxes $2,000 Investment Interest Expenses $5,000Explanation / Answer
Computation of Taxable Income for year 2016 Particulars Amount($) Salary 50000 Less: Travel expenses not reimbursed -2000 Dividend 800 Interest Income 3200 Less: Inerest Expense on Investment -3200 Loss on Car Stolen after Insurance Reimbursement -8000 Less:Interest on Home Mortgage -7600 Total Income 33200 Total Income Up to $9275 927.5 on Balance (33200-9275)@15% 3588.75 Total Tax 4516.25 Less: Income tax Witheld 3000 Less: State and Local Income tax paid 2400 Total Tax Payable 0
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