Problem 3-30 (LO. 1) Compute Aiden\'s 2017 taxable income on the basis of the fo

Question

Problem 3-30 (LO. 1)

Compute Aiden's 2017 taxable income on the basis of the following information. Aiden is married but has not seen or heard from his wife for over three years.

The personal exemption amount for 2017 is $4,050. Click here to access the standard deduction table to use, if required.

a.   Indicate whether the items are taxable or not taxable to Aiden.

b.   What is Aiden's filing status?

c.   Should Aiden itemize his deductions or take the standard deduction?

d.   Aiden's taxable income in 2017 is $

Salary $80,000 Interest on bonds issued by City of Boston 3,000 Interest on CD issued by Wells Fargo Bank 2,000 Cash dividend received on Chevron common stock 2,200 Life insurance proceeds paid upon death of Aunt Margie (Aiden was the designated beneficiary of the policy) 200,000 Inheritance received on death of Aunt Margie 100,000 Jackson (a cousin) repaid a loan Aiden made to him in 2010 (no interest was provided for) 5,000 Itemized deductions (state income tax, property taxes on residence, interest on home mortgage, and charitable contributions) 9,700 Number of dependents (children, ages 17 and 18; mother-in-law, age 60) 3 Age 43

Explanation / Answer

Aiden chose to itemize his deduction from AGI ($9700) because it provided a greater deduction than head of house hold ( as an abandoned spouse ) . Aiden's taxable income is $48950. Aiden is single as his spouse is away for 3yrs without being heard

Salary +8 0000 Interest on bonds issued by city of boston (3000) excluded Interest on CD issued by wells Fargo Bank + 2000 Cash dividends received on Chevron common stock + 2200 Life insurance proceeds paid on death of aunt ( Aiden was the designated beneficiary of the policy) (200000) excluded Inheritance received upon death of aunt (100000) excluded Jackson (a cousin) repaid a loan Aiden made to him in 2008 ( no interest was provided for) (5000) excluded Itemized deductions ( state income tax, property taxes on residence, interest on home mortgage, and charitable contributions) - 9700 Number of dependents (children, ages 17 and 18 and mother-in-law, age 70) (3 * 4050) - 12150 AGI ( 80000 + 2000 + 2200 - 9700 - 12150) $ 62350 AGI $ 62350 Standard deduction 2017 ( head of household) 9350 Personal exemption ( 1 * 4050) 4050 $ 48950

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