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 Part-a a. What is the Jacksons' taxable income, and what is their tax liability or (refund)? Description Gross income (2) For AGI deductions 3) Adjusted gross income (4) Standard deduction

Answer 1

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	16500
6	Greater of standard deduction and itemized deduction	24400
7	Qualified business income deduction (1000*20%)	2000
8	From AGI deducitons	26400
9	Taxable income (3-8)	83600
10	Income tax liability (9086+(22%*(83600-78950)))	10109
11	Other taxes	0
12	Total tax (9+10)	10109
13	Credits (3*2000)+500	(6500)
14	Prepayments	(3550)
	Tax due (11+12+13)	$59

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