9. G had income and expenses as follows for the current taxable year (assume the
ID: 2550384 • Letter: 9
Question
9. G had income and expenses as follows for the current taxable year (assume the amounts given are correct): Total income $ 32,400 Exclusions (municipal bond interest) 2,000 Deductions for AGI 1,200 Total itemized deductions 9,920 Standard deduction 5,150 Exemption deductions 6,600 What are G’s adjusted gross income and her taxable income, respectively? Assume all amounts are correct. a. $29,200; $12,680 b. $31,200; $14,680 c. $29,200; $17,050 d. $28,000; $12,680
10. M, age 65 and single, has no dependents and an AGI of $50,000 and these expenses: medical expenses of $2,200, personal casualty losses of $5,000, real estate taxes of $2,000, and residence mortgage interest of $1,000. In 2017 the taxpayer should deduct which of the following total amounts from AGI? a. $10,200 b. $14,150 c. $11,350 d. Some other amount
11. After his great performance for the U.S. soccer team in the World Cup, Alex, a U.S. citizen, signed a contract to play with the Italian team, Parma, earning over $500,000 per year. While there, he met the great English star, Harry. Which of the following statements is correct? a. Assuming that Alex lives in Italy during all of the next year, his Italian income (salary and interest from his Italian bank account) would probably be subject to Italian taxes but he would not be required to report any of his Italian income for U.S. income tax purposes since he lived in Italy. b. Assuming that Alex lives in Italy only for a few months during all of next year, his income earned in Italy would effectively be taxed twice, i.e., he would pay taxes to the Italian government and taxes to the U.S. govern¬ment, unless a treaty provided otherwise. c. Assume Harry, the English star, comes to the U.S. in the next to play in the U.S. professional soccer league. Harry would not be required to file a regular income tax return on income earned in the U.S. if he is considered a resident alien. d. None of the above is correct.
12. G and J are married and have three children: R, S, and C. R, age 19, was the star of the men’s volleyball team at State University, where he was a full-time student in the current year. He received a scholarship valued at $8,000. G and J provide his other support of $5,000. S, who was a full-time high school stu¬dent all year, worked part-time, earning $3,700. G and J spent $4,000 toward S’s support. C was a high school freshman and had no income during the year. How many exemptions may G and J claim on their joint tax return? a. Two b. Three c. Four d. Five
Explanation / Answer
9. Answer is b. $31,200: $14,680.
Municipal bond interest are exempt from tax, hence not to be added to Total Income.
Deduction for AGI will reduce the Total Income, hence Adjusted Gross Income will be $31,200 ($32,400-$1,200).
Either Itemized deduction or Standard deduction is allowed. G will opt for Itemized deduction as it is higher than Standard Deduction. Also, exemption deduction will also reduce the taxable income of G. Hence, the Taxable Income of G will be $14,680 ($31,200-$9,920-$6,600).
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