Question

# In 2017, Deon and NeNe are married filing jointly. They have three dependent children under 18...

In 2017, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe’s AGI is \$813,800, their taxable income is \$722,750, and they itemize their deductions as follows: real property taxes of \$10,000, state income taxes of \$40,000, miscellaneous itemized deductions of \$4,000 (subject to but in excess of 2% AGI floor), charitable contributions of \$11,050, and mortgage interest expense of \$41,000 (\$11,000 of which is attributable to a home-equity loan used to buy a new car). Use Tax Rate Schedule for reference.

Problem 8-65 Part a a. What is Deon and NeNe's AMT?

Calculaiton of Income for AMT.

Net Taxable Income - \$722,750

Property Taxes - 10,000

State Taxes - 40,000

Itemized deduction - 0 (As they exceed 2% of AGI)

Charitable Donation - 0 (As they are allowed deduction for AMT)

Morgage Interest Expense -41,000 ( Interest attributable to buy car is not allowed as a deduction)

Total AMT Income - 813,750

Since it is below the threshold of \$1,000,000 for Joint filler exemption is \$ 109,400, therefore taxable AMT - (813,750 - 109400) = 704350. Tax rate 28 % will apply =(704350*0.28) = \$197,218.

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