Return to c Through November, Cameron has received gross income of $120,000. For December, Cameron is considering whether to accept one more work engagement for the year. Engagement 1 will generate $7,000 of revenue at a cost to Cameron of $3,000, which is deductible for AGI. In contrast, engagement 2 will generate $5,000 of qualified business income (QBI), which is eligible for the 20 percent QBI deduction. Cameron files as a single taxpayer, and he did not contribute to charity during the year. Calculate Cameron's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions. Answer is complete but not entirely correct. Description Engagement 1 Engagement 2 (1) Gross income before new work engagement 15 120,000 $ 120.000 (2) Income from engagement 7,000 5,000 (3) Additional for AGI deduction (3,000) 0 (4) Adjusted gross income $ 124,000 $ 125,000 (5) Greater of itemized deductions or standard deduction 12.200 12.200 (6) Deduction for QBI 00 (1.000) Taxable income $ 111.800 S 111.800 < Prev 5 of 22 Next >
Return to c Through November, Cameron has received gross income of $120,000. For December, Cameron is considering whether to accept one more work engagement for the year. Engagement 1 will generate $7,000 of revenue at a cost to Cameron of $3,000, which is deductible for AGI. In contrast, engagement 2 will generate $5,000 of qualified business income (QBI), which is eligible for the 20 percent QBI deduction. Cameron files as a single taxpayer, and he did not contribute to charity during the year. Calculate Cameron's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions. Answer is complete but not entirely correct. Description Engagement 1 Engagement 2 (1) Gross income before new work engagement 15 120,000 $ 120.000 (2) Income from engagement 7,000 5,000 (3) Additional for AGI deduction (3,000) 0 (4) Adjusted gross income $ 124,000 $ 125,000 (5) Greater of itemized deductions or standard deduction 12.200 12.200 (6) Deduction for QBI 00 (1.000) Taxable income $ 111.800 S 111.800 < Prev 5 of 22 Next >
Chapter2: Income Tax Concepts
Section: Chapter Questions
Problem 45P
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Transcribed Image Text:Return to c
Through November, Cameron has received gross income of $120,000. For December, Cameron is considering whether to accept one
more work engagement for the year. Engagement 1 will generate $7,000 of revenue at a cost to Cameron of $3,000, which is
deductible for AGI. In contrast, engagement 2 will generate $5,000 of qualified business income (QBI), which is eligible for the 20
percent QBI deduction. Cameron files as a single taxpayer, and he did not contribute to charity during the year.
Calculate Cameron's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has
no itemized deductions.
Answer is complete but not entirely correct.
Description
Engagement 1
Engagement 2
(1) Gross income before new work engagement
15
120,000
$
120.000
(2) Income from engagement
7,000
5,000
(3) Additional for AGI deduction
(3,000)
0
(4) Adjusted gross income
$
124,000 $
125,000
(5) Greater of itemized deductions or standard deduction
12.200
12.200
(6) Deduction for QBI
00
(1.000)
Taxable income
$
111.800 S
111.800
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