Question

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions, and they had $3,550 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may only claim the child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) Comprehensive Problem 4-55 Parts-c through f c. What would their taxable income be if their itemized deductions totaled $28,000 instead of $16,500? Amount Description (1) Gross income (2) For AGI deductions (3) Adjusted gross income Standard deduction To tamtrad dasturtinne

Answer 1

Part C

1	Gross income	110000
2	For AGI Deductions	0
3	AGI (1-2)	110000
4	Standard deduction for married filing jointly	24400
5	Itemized deductions	28000
6	Greater of standard deduction and itemized deduction	28000
7	Deduction for Qualified business income (10000*20%)	2000
8	Total deductions from AGI	30000
	Taxable income (3-8)	80000

	Gross income
	salary	100000
	Gain on house sale (excluded)
	Qualified business income	10000
	Gross income	110000

Part D

1	Gross income	110000
2	For AGI Deductions	6000
3	AGI (1-2)	104000
4	Standard deduction for married filing jointly	24400
5	Itemized deductions	0
6	Greater of standard deduction and itemized deduction	24400
7	Qualified business income deduction (10000*20%)	2000
8	From AGI deductions	26400
	Taxable income (3-8)	$77600

Part E

Taxable income

$80600

1	Gross income	107000
2	For AGI Deductions	0
3	AGI (1-2)	107000
4	Standard deduction for married filing jointly	24400
5	Itemized deductions	16500
6	Greater of standard deduction and itemized deduction	24400
7	Qualified business income deduction (1000*20%)	2000
8	From AGI deducitons	26400
	Taxable income (3-8)	$80600

	Gross income
	salary	100000
	Gain on house sale (excluded)
	Qualified business income	10000
	Capital loss	(3000)
	Gross income	107000

Part F

Taxable income

$83600

No change because investment is not sold at appreciated value. The assets will not be recognized as income until sold