Question

1. FOREIGN-EARNED INCOME Christian Okoye is given a temporary assignment to work in a foreign country. He arrives on October 12, 2019, and departs on October 1, 2020. Mr. Okoye does not establish a permanent residency in the foreign country, but he is present for at least 330 days out of a 12-month period, beginning on October 13, 2019. (I.e. one day after he arrived in the foreign country.) Required: Based on the above information, how much income can Mr. Okoye exclude from gross income in 2019? 2. PENSION INCOME Jan Stenerud retires when he reached the age of 66. He begins receiving a monthly pension of $400 per month from his employer's qualified retirement plan. While employed, Mr. Stenerud contributed $15,800 to the plan. Required: Based on the above information, and using the simplified method as described in your textbook, compute Mr. Stenerud's monthly exclusion amount. How much is Mr. Stenerud's taxable pension in the first year, assuming he receives 12 monthly checks? 3. CALCULATE TAXABLE INCOME In 2019, Gus Williams, a single taxpayer, earns a salary of $55,000, reports business income of $7,000, as well as interest income from taxable bonds of $400 and interest income from tax- exempt bonds of $200. Gus also reports his business expenses totaled $3,000. REQUIRED: Based on the above information, calculate his taxable income. 4. INCOME TAX LIABILITY CALCULATION Bip Roberts files his tax return as a single tax payer, and reports taxable income of $135,000 last year. REQUIRED: Using the tax table, below, calculate Bip's tax liability. Taxes Taxable income Up to $9,700 Between $9,701 and $39,475 Between $39,475 and $84,200 Between $84,201 and $160,725 Between $160,725 and $204,100 10% of taxable income $970 plus 12% of income over $9,700 $4,543 plus 22% of income over $39,475 $14,383 plus 24% of income over $84,200 $32,749 plus 32% of income over $160,725

Answer 1

1. Foreign Earned Income:

In order to exclude foreign earned income from gross income, the person should either qualify a bona fide residence test or physical presence test.

Christian Okoye qualifies the physical residence test as he stays outside U.S. for atleast 330 days, in any consecutive 12-month period.

Thus he is eligible to exclude upto $105,900 in the foreign earned income for 2019.

3. Net Taxable Income= Gross Income from all sources except non taxable incomes- Expenses=( 55000+7000+400)-3000

Net Taxable Income= $59,400

4. Taxable income= $135,000

Tax slab-- $14,383 + 24% of income over $84,200

Therefore, Income tax to be paid= $14,383 + 24% *(135000-84200)= $26,575

Please specify the method you are required to calculate for Part 2.

Thank You.