M and W are husband and wife. They are filing joint tax returns for both 2009 an
ID: 2475989 • Letter: M
Question
M and W are husband and wife. They are filing joint tax returns for both 2009 and 2010 and have zero dependents. Below are their income and deductions for each year. Determine their taxable incomes, if any, for each year.
Item 2009 2010
Interest Income 4,000 3,000
Business gross receipts 400,000 225,000
Business cost of sales 200,000 175,000
Other business expenses 125,000 125,000
M’s Salary (not from the business) 80,000 40,000
Net Capital Gains/(losses) 15,000 (3,000)
Interest Expense on Mortgage 25,000 22,000
Property taxes 4,000 3,000
Medical expenses (before any limitation) 10,000 0
Casualty loss (personal, before any limits but after insurance reimbursement) 0 4,000
Explanation / Answer
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Particulars 2009 2010 Interest Income 4000 3000 Bus Income (Gross Receipts- Cost of Sales- Business Exp) 75000 - 75000 M's Salary 80000 40000 Capital Gain/ (Loss) 15000 -3000 Gross Income/ Loss 174000 -35000 Less Deductions for Med Exp -10000-
Taxable Income 164000 NilRelated Questions
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