Question

Carl and Renee have the following:

Total income of $149,222

Total deduction $44,500

Taxable income $104,722

With the above information Carl and Renee have a tax payable of $11,420.

Assume all the above are the same, but Carl received $12,000 as workers' compensation while he was unable to work because of injury. Their house was damaged by a hurricane (a tree fell on it). His fellow employees took up a collection of $800 to help cover his expenses. Carl and Renee spent $12,000 repairing the hurricane damage. Renee received $500 for exceeding her sales quota from her employer. What is the effect of these events on their gross income?

Answer 1