Compute taxable income in each of the following independent situations.
a. Drew and Meg, ages 40 and 41 respectively, are married and file a joint return. In addition to four dependent children, they have AGI of $65,000 and itemized deductions of $15,000.
b. Sybil, age 40, is single and supports her dependent parents, who live with her. Sybil also supports her grandfather, who lives in a nursing home. She has AGI of $80,000 and itemized deductions of $8,000.
c. Scott, age 49, is a surviving spouse. His household includes two unmarried stepsons who qualify as his dependents. He has AGI of $75,000 and itemized deductions of $10,100.
d. Amelia, age 33, is an abandoned spouse and maintains a household for her three dependent children. She has AGI of $58,000 and itemized deductions of $9,100.
e. Dale, age 42, is divorced but maintains the home in which he and his daughter, Jill, live. Jill is single and qualifies as Dale’s dependent. Dale has AGI of $64,000 and itemized deductions of $9,900.
Note: Problems 29 and 30 can be solved by referring to Figure 3.1, Exhibits 3.1 through 3.3, Tables 3.1 and 3.2, and the discussion under Deductions for Adjusted Gross Income in this chapter.
29. LO.1, 8 Compute the taxable income for 2013 for Emily on the basis of the following information. Her filing status is single.
Interest income from bonds issued by Xerox 1,100
Alimony payments received 6,000
Contribution to traditional IRA 5,500
Gift from parents 25,000
Capital gain from stock investment, held for 7 months $ 2,000
Amount lost in football office pool (sports gambling is illegal where
Emily lives) 500
Number of potential dependents (two cousins, who live in Canada) ?
30. LO.1 Compute the taxable income for 2013 for Aiden on the basis of the following information. Aiden is married but has not seen or heard from his wife since 2010.
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 on 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 2008 (no interest was provided for) 5,000
Itemized deductions (state income tax, property taxes on residence, interest on home mortgage, charitable contributions) 9,000
Number of dependents (children, ages 17 and 18; mother-in-law, age 60) 3
31. LO.2 Determine the amount of the standard deduction allowed for 2013 in the following independent situations. In each case, assume that the taxpayer is claimed as another person’s dependent.
a. Curtis, age 18, has income as follows: $700 interest from a certificate of deposit and $6,000 from repairing cars.
b. Mattie, age 18, has income as follows: $600 cash dividends from a stock investment and $4,700 from handling a paper route.
c. Mel, age 16, has income as follows: $800 interest on a bank savings account and $700 for painting a neighbor’s fence.
d. Lucy, age 15, has income as follows: $400 cash dividends from a stock investment and $500 from grooming pets.
e. Sarah, age 67 and a widow, has income as follows: $500 from a bank savings account and $3,200 from babysitting.
32. LO.4 Using the legend provided below, classify each statement as to the taxpayer for dependency exemption purposes.
QC = Could be a qualifying child
QR = Could be a qualifying relative
B = Could satisfy the definition of both a qualifying child and a qualifying relative
N = Could not satisfy the definition of either a qualifying child or a qualifying relative
a. Taxpayer’s son has gross income of $7,000.
b. Taxpayer’s niece has gross income of $3,000.
c. Taxpayer’s uncle lives with him.
d. Taxpayer’s daughter is age 25 and disabled.
e. Taxpayer’s daughter is age 18 but does not live with him. Her gross income is $8,000.
f. Taxpayer’s cousin does not live with her.
g. Taxpayer’s brother does not live with her.
h. Taxpayer’s sister lives with him. She is age 20 and has dropped out of school.
i. Taxpayer’s older nephew is age 23 and a full-time student.
j. Taxpayer’s grandson lives with her. His gross income is $7,000.