Question

ANSWER THE FOLLOWING FOR EACH QUESTIONS: A) Determine the AGI this year for the taxpayer(s). B)...

ANSWER THE FOLLOWING FOR EACH QUESTIONS:

A) Determine the AGI this year for the taxpayer(s).

B) Determine the amount of itemized deductions the taxpayer(s) has (have) available this year.

C) Using the 2018 standard deduction amounts (assuming no additional amounts for age or blindness) from Appendix D in of your book, state whether the taxpayer(s) itemize or take the standard deduction. I am not asking for you to state the amount of either the standard deduction or the itemized deductions chosen.

D) Use the individual tax formula and a flat 20% tax rate on all types of taxable income to determine the amount of taxes due or refund amount. Remember to clearly marking the answer as either the amount of tax due or a refund due (e.g. refunds are negative amounts as represented with parentheses or a negative sign, alternatively you can just write “refund” next to it). Assume AMT does not apply, and there are no tax credits available.

4. Rebecca and Thomas are married and file jointly for the 2018 tax year. They are both advertising consultants for the same company. They earned $85,000 in salaries in total and the company forgave a $20,000 loan they made to the couple earlier in the tax year. They were solvent at the time the loan was forgiven. Their firms withheld $20,000 of tax from their salaries this year in total. In addition to the above, the following occurred during the year:

• They paid $15,000 in mortgage interest and $3,000 in real estate taxes for their primary residence.

• Rebecca paid $6,000 on college tuition this year.

• They sold their SUV for $1,500 less than its adjusted tax basis. They had owned it for 7 years. They are not high income taxpayers.

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Answer #1

Calculation Of AGI = $85,000 (Salary) + $20,000 (Cancellation of Debt) = $105,000. Thus, Total AGI = $105,000.

we are considering standard deduction of $24,000, since the itemized deductions are less than standard deduction.

Itemized deduction = $15,000 (mortgage interest) + $3,000 (real estate taxes) = $18,000.

Taxable Income = AGI - Standard Deduction = 105,000 - 24,000 = 81,000

Tax @ 20% = 81,000*20% = $16,200

Taxes withheld = $20,000

Refund = $16,200 - $20,000 = $3,800

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