Diego, age 28, married Dolores, age 27, in 2015. Their salaries for the year amo

Question

Diego, age 28, married Dolores, age 27, in 2015. Their salaries for the year amounted to $47,126 and they had interest income of $3,500. Diego and Dolores’ deductions for adjusted gross income amounted to $2,000, their itemized deductions were $11,576, and they claimed two exemptions on their return.

a. What is the amount of their adjusted gross income? $

b. What is the amount of their itemized deductions or standard deduction? $

c. What is the amount of their taxable income? d. What is their tax liability for 2015?

Problem 10: Download the TAX 2000 Wk 1 Problem 10 Instructions for further information

Jim (age 50) and Martha (age 49) are married with three dependent children. They file a joint return for 2015. Their income from salaries totals $49,500, and they received $10,125 in taxable interest, $5,000 in royalties, and $3,000 in other ordinary income. Jim and Martha’s deductions for adjusted gross income amount to $3,200, and they have itemized deductions totalling $13,200. Calculate the following amounts:

a. Gross income

b. Adjusted gross income

c. Itemized deduction or standard deduction amount

d. Number of exemptions e. Taxable income

Chapter 2 Lab Work

The IRS requires that certain items be included in gross income, while other items can excluded from gross income. In this Lab Work, you'll be analyzing various scenarios to determine the appropriate amounts of income to include in gross income on Form 1040.

1. Indicate whether each of the items listed below would be included (I) in or excluded (E) from gross income for the 2015 tax year.

a. Welfare payments

b. Commissions

c. Hobby income

d. Scholarships for room and board

e. $300 set of golf clubs, an employee award for length of service

f. Severance pay

g. Ordinary dividend of $50

h. Accident insurance proceeds received for personal bodily injury

i. Inheritances

j. Gifts

k. Tips and gratuities

2. John installed a new roof on his friend’s house in return for a used truck worth $6,000. How much income must John report on his tax return for his services?

3. Larry is a tax accountant and Sheila is a hairdresser. Larry prepares Sheila’s tax return for free and Sheila agrees to style Larry’s hair six times for free in return for the tax return. The value of the tax return is approximately $300 and the hair styling work is approximately $300.

a. How much of the $300 is includable income to Larry? Why?

b. How much of the $300 is includable income to Sheila? Why?

11. How much of each of the following is taxable?

a. Cheline received a $50,000 gift bag from the Oscars during 2015.

b. Jon received a gold watch worth $750 for 25 years of service to his accounting firm (not a qualified award).

c. Kerry won $1,000,000 in her state lottery.

d. Deborah is a professor who received $50,000 as an award for her scientific research from the university that employs her

Explanation / Answer

Calculation of tax liabilty for 2015 Particulars Amount ($) Filing Status Married filling jointly Salaried Income 47126 Interest Income 3500 Income $ 37, 050 Gross Income 50626 Calculation of Tax: Less:Deductions 2000 Taxable Income Tax Rate Working Tax Amount ($) Adjusted Gross Income (AGI) 48626 $ 0 to $ 18450 10% 18450*10% 1845 Less:Itemised Deductions 11576 Above $ 18450 upto $ 74900 15% (37050-18450)*15% 2790 Taxable Income 37,050 Total 4635 Thus, total Tax liability for 2015 is $ 4,635

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