Accounts

3-31.Tom and Linda are married taxpayers who file a joint return. They have itemized deductions of $12,250 and four exemptions. Assuming an adjusted gross income of $40,000, what is their taxable income for 2012?

SOLUTION:

The personal exemption for 2012 is $3,800.The personal exemption of Tom and Linda is 4 x 3,800=15,200.The basic standard deduction for a married couple filing jointly for 2012 is $11,900.

Taxable income=adjusted gross income-greater of itemized deductions or standard deductions- personal exemptions

Taxable income of Tom and Linda =40,000-12,250- 15,200=$12,550

3-32.Compute Marie's taxable income for 2012, assuming she is single and claims two dependent children. Her adjusted gross income is $70,000, and she has itemized deductions of $9,000.

SOLUTION:

The personal exemption for 2012 is $3,800.The personal exemption of Marie is 3 x 3,800=11,400.The basic standard deduction for a single taxpayer for 2012 is $5,950.

Taxable income=adjusted gross income-greater of itemized deductions or standard deductions- personal exemptions

Taxable income of Marie=70,000-9,000-11,400 =$49,600

3-36.Compute Stanley's taxable income for 2012, assuming he has $1,000 in wages from working in a grocery store and $2,000 in interest income from some bonds he owns. Stanley, age 16, is claimed as a dependent on his parents' return.

SOLUTION:

Adjusted gross income=1,000 + 2,000=$3,000

Itemized deduction=1,000 + 300=$1,300

According to our text-“For 2012, the standard deduction for an individual who can be claimed as a dependent on the tax return of another taxpayer is the greater of the individual's earned income plus $300 (up to the maximum allowable standard deduction) or $950.”

Taxable income of Stanley=adjusted gross income-itemized deduction

=3,000-1,300

=$1,700

13-55.Mr. Z, a non dealer, sold assets on an installment plan. Determine Mr. Z's gross...