John E. Owens and Sally A. Owens, each age 42, married on 7th September, 2011. Sally and John can file a joint return for 2011.
John was divorced from Joyce in March 2010. Under the divorce agreement, John is to pay Joyce $ 1,000 per month for subsequently 10 years or until Joyce's death, whichever occurs first. John pays Joyce $ 12,000 in 2011. In addition, in January 2011, John gives Joyce $ 50,000, which is designated as being for her share of the marital property. Also, John is in charge for all prior years' income taxes.
John's net wage compensation for 2011 is $ 190,000. His employer withheld $ 12,000 for Federal income taxes and $ 3,400 for state income taxes. The subsequent amounts were withheld for FICA taxes: $ 4,485.60 ($ 106,800 X 4.2%) for Social Security and $ 2,755 ($ 190,000 X 1.45%) for Medicare.
Sally currently graduated from law school and is employed by Legal Aid Society, Inc., as a public defender. She gets a salary of $ 40,000 in 2011. Her employer withheld $ 5,700 for Federal income taxes and $2,300 for state income taxes. The subsequent amounts were withheld for FICA taxes: $ 1,680.00 ( $ 40,000 X 4.2%) for Social Security and $ 850 ($ 40,000 X 1.45%) for Medicare.
Sally has $ 1,500 in dividend on Yellow Corporation stock and she inherited. Sally gets an $ 850 refund of 2010 state income taxes. She used the standard deduction on her Federal income tax return of 2010. Alfred receives $ 1,300 refund on his 2010 state income taxes. He itemized deduction on his Federal income tax return of 2010. Sally and John pay $ 4,800 interest and $ 1,450 property taxes on their personal residence in 2011. Their charitable contributions net $ 2,600 (all to their church).
REQUIRED
Evaluate John and Sally's taxable income for 2011.