Homework Problem I Tim and Faith McGraw are married and have three sons. During

Question

Homework Problem I Tim and Faith McGraw are married and have three sons. During the year, Faith earned a salary of $95,000, and Tim's investments earned interest of $4,250. Also, Tim received a gift of $20,000 from his parents. The following data has been compiled to aid in the preparation of their joint income tax return: Salary income (from W-2) Interest income (from 1099) $95,000 4,250 15,000 Itemized deductions Personal exemptions Income taxes withheld 5,000 Compute the amount of: a) taxable income, b) income taxes and c) amount of tax to be paid (refunded). LIABILITIES ACC 111 Income Taxes Page

Explanation / Answer

A) Taxable Income Particulars Amount Index Total Income                                99,250 1 Total Deductions                                15,000 Total Exemptions                                20,250 2 Taxable Income                                64,000 Regular Taxes                                  8,668 Alternative Minimum Tax                                         -   Net Investment tax                                         -   All tax credit                                  4,200 Total tax credit                                  4,468 Marginal tax Rate 15% Tax Prepayments                                  5,000 Estimated Refund'                                      533 1 Total Taxable Income would comprise of Salary earned by husband, investment income earned. However for Cash gift of $20 000, it is not mentioned that parents have not paid tax & hence we assumed that cash gift received is net of taxes from parents and it will be considered as parents income. 2 Each tax exemption is worth $4,050 for Tax Year 2017 assuming we are filling the ITR for 2017. hence total exemption will be $20 250.

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