Income Tax Fundamentals 2020
Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
Question
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Chapter 1, Problem 9P

a.

To determine

Introduction: Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applicability is not limited to individuals only but also corporations, firms, trusts, etc.

The gross income.

a.

Expert Solution
Check Mark

Answer to Problem 9P

Gross income: $67,625

Explanation of Solution

Given information:

Salary income: $49,500

Interest income: $10,125

Royalty income: $5,000

Other income: $3,000

Deductions for adjusted gross income: $3,200 and,

Itemized deductions: $18,600

So, the gross income of J and M will be:

  Gross income =(Salary income+Interest income+Royalty income+Other income)

  Gross income =$49,500+$10,125+$5,000+$3,000                       =$67,625

b.

To determine

Introduction: Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applicability is not limited to individuals only but also corporations, firms, trusts, etc.

The adjusted gross income.

b.

Expert Solution
Check Mark

Answer to Problem 9P

Adjusted gross income (AGI): $64,425

Explanation of Solution

Given information:

Salary income: $49,500

Interest income: $10,125

Royalty income: $5,000

Other income: $3,000

Deductions for adjusted gross income: $3,200 and,

Itemized deductions: $18,600

So, the gross income of J and M will be:

  Gross income =(Salary income+Interest income+Royalty income+Other income)

  Gross income =$49,500+$10,125+$5,000+$3,000                       =$67,625

Now, the calculation of adjusted gross income will be as under:

  Adjusted gross income =Gross income-deduction for adjusted gross income                                    =$67,625-$3,200                                    =$64,425

c.

To determine

Introduction: Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applicability is not limited to individuals only but also corporations, firms, trusts, etc.

The amount of itemized deduction or the standard deduction.

c.

Expert Solution
Check Mark

Answer to Problem 9P

Standard deduction: $24,400

Explanation of Solution

Given information:

Salary income: $49,500

Interest income: $10,125

Royalty income: $5,000

Other income: $3,000

Deductions for adjusted gross income: $3,200 and,

Itemized deductions: $18,600

So, the gross income of J and M will be:

  Gross income =(Salary income+Interest income+Royalty income+Other income)

  Gross income =$49,500+$10,125+$5,000+$3,000                       =$67,625

Now, the calculation of adjusted gross income will be as under:

  Adjusted gross income =Gross income-deduction for adjusted gross income                                    =$67,625-$3,200                                    =$64,425

Since itemized deductions are $18,200 and the amount of standard deduction is $24,400 available to J and M, so greater amount will be selected. Thus standard deduction of $24,400 will be considered.

d.

To determine

Introduction: Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applicability is not limited to individuals only but also corporations, firms, trusts, etc.

The taxable income.

d.

Expert Solution
Check Mark

Answer to Problem 9P

J’s taxable income: $40,025

Explanation of Solution

Given information:

Salary income: $49,500

Interest income: $10,125

Royalty income: $5,000

Other income: $3,000

Deductions for adjusted gross income: $3,200 and,

Itemized deductions: $18,600

So, the gross income of J and M will be:

  Gross income =(Salary income+Interest income+Royalty income+Other income)

  Gross income =$49,500+$10,125+$5,000+$3,000                       =$67,625

Now, the calculation of adjusted gross income will be as under:

  Adjusted gross income =Gross income-deduction for adjusted gross income                                    =$67,625-$3,200                                    =$64,425

Since itemized deductions are $18,600 and the amount of standard deduction is $24,400 available to J and M, so greater amount will be selected. Thus standard deduction of $24,400 will be considered to calculate taxable income.

Thus, the calculation of taxable income will be as under:

  Taxable income=Adjusted gross income-Standard deduction                        =$64,425$24,400                        =$40,025

e.

To determine

Introduction: Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applicability is not limited to individuals only but also corporations, firms, trusts, etc.

The income tax liability.

e.

Expert Solution
Check Mark

Answer to Problem 9P

Tax liability: $13,227.5

Explanation of Solution

Given information:

Salary income: $49,500

Interest income: $10,125

Royalty income: $5,000

Other income: $3,000

Deductions for adjusted gross income: $3,200 and,

Itemized deductions: $18,600

So, the gross income of J and M will be:

  Gross income =(Salary income+Interest income+Royalty income+Other income)

  Gross income =$49,500+$10,125+$5,000+$3,000                       =$67,625

Now, the calculation of adjusted gross income will be as under:

  Adjusted gross income =Gross income-deduction for adjusted gross income                                    =$67,625-$3,200                                    =$64,425

Since itemized deductions are $18,600 and the amount of standard deduction is $24,400 available to J and M, so greater amount will be selected. Thus standard deduction of $24,400 will be considered to calculate taxable income.

Thus, the calculation of taxable income will be as under:

  Taxable income=Adjusted gross income-Standard deduction                        =$64,425$24,400                        =$40,025

Therefore, the tax liability will be computed as under:

  Tax liability =$4,543+22%($40,025$39,475)                   =$4,543+0.22×$39,475                   =$4,543+$8,684.5                   =$13,227.5

Therefore, the tax liability will be $13,227.5 .

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Chapter 1 Solutions

Income Tax Fundamentals 2020

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