Chapter 4, Problem 4FPC

a

Summary Introduction

Case summary:KB’s family income is $150,000.They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000.They are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: K and R’s gross income.

Introduction:

Income tax:Taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this, tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

b

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000.They are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: The adjusted gross income after R puts $5,600 in qualified retirement plan.

Introduction:

Income tax:Taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this, tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

c

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: the exemptions family can claim for household

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

d

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: the allowable standard deduction for household.

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

e

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: If R’s family take standard deduction or itemized deductions of $13,100.

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

f

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: The taxable income for joint returns.

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

g

Summary Introduction

Case summary:KB’s family income is $150,000. They had life insurance proceeds from a deceased aunt, interest on savings, alimony and child support ex-husband, cash Christmas present and K’s scholarship for part time college.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: The tax liability and their marginal tax rate.

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.

h

Summary Introduction

Case summary:KB’s family income $150,000, it is required to determine the joint tax liability, standard deductions, itemized deductions and marginal tax rate, the same has been determined using internal revenue code for tax assessment.

Characters in the case:KB and RC in New York City.

Adequate information:KB and RC has $160,000, they are required to determine their gross income and tax liability after considering itemized deductions and standard deductions, after that it is required to determine their tax payable it they withheld $25,000.

To determine: The amount of income tax R’s family owe to government if R’s employer withheld $25,000 for income Taxes.

Introduction:

Income tax: taxes are charged by a government on its citizens and their property. In U.S. the Internal Revenue Service (IRS) responsible for collecting federal income taxes as per legal provisions in the Internal Revenue Code.

Taxes can be classified as progressive and regressive. The federal personal income tax is a progressive tax of the gradual increase in the tax rate as income increases. A regressive tax operates in opposite way. Under this tax rate is same on all income levels, with result that lower income people pay proportionally more taxes. Example for regressive tax is state sales tax.