Problem 1. Ashley earns a salary of $35,000, has capital gains of $4,000, and interest income of $3,000 in 2007. Her husband died in 2006. Ashley has a dependent son, Tyrone, who is age 8. Her itemized deductions are $8,000.
a. Calculate Ashley's taxable income for 2007.
b. What is her filing status?
Problem 2. Homer (age 68) and his wife Jean (age 70) file a joint return. They furnish all of the support of Luther (Homer's 90-year old father), who lives with them. For 2007, they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $42,000. Compute Homer and Jean's taxable income for 2007.
Problem 3. Scott had the following transactions for 2007:
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Salary
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$ 90,000
|
|
Alimony paid
|
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6,000
|
|
Recovery from car accident-
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|
|
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Personal injury damages
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$50,000
|
|
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Punitive damages
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75,000
|
125,000
|
|
Gift from parents
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24,000
|
|
Property sales-
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|
|
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Loss on sale of sailboat (used for pleasure and owned 4 years)
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($ 3,000)
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|
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Gain on sale of GMC stock (held for 8 months as an investment)
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5,000
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2,000
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What is Scott's AGI for 2007?
Problem 4. Eva had the following transactions during 2007:
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Salary
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$80,000
|
|
Interest income on bonds-
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|
|
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Issued by City of Baltimore
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$2,000
|
|
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Issued by Dell Corporation
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3,000
|
5,000
|
|
Alimony received
|
|
3,000
|
|
Child support received
|
|
9,000
|
|
City and state income taxes paid
|
|
4,000
|
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Bank loan obtained to pay credit card debt
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10,000
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What is Eva's AGI for 2007?
Problem 5. The amount of Social Security benefits received by an individual that he or she must include in gross income:
a. Is computed in the same manner as an annuity [exclusion = (cost/expected return) ´ amount received].
b. May not exceed the portion contributed by the employer.
c. May not exceed 50% of the Social Security benefits received.
d. May be zero or as much as 85% of the Social Security benefits received, depending upon the taxpayer's Social Security benefits and other income.
e. None of the above.