Question

4. Angela Bower's husband passed away last year. In 2019, Angela lives in a house with her son Jonathan (age 8) in Fairfield, Connecticut. She also supports her mother, Mona (age 67), who lives just down the road in a 1 bedroom apartment. Angela earned $175,000 in salary as an advertising agency executive. She also had two investment assets during the year. The first was a municipal bond for the city of Fairfield that she paid $10,000 for on the first day of this year that earns a 2% interest rate, paid out at the end of the year. The second was a U.S. Treasury bill that she also paid with $10,000 on the first day of the year that earns a 3% interest rate, paid out at the end of the year. Mona likes to spend her time in leisure and does not work during the year and, as a result, did not file a tax return. Angela has no itemized deductions, no AMT, no credits, and no prepayments. a. What filing status does Angela use? b. What was the amount of realizable income for Angela in 2019? c. What will be included in Angela's gross income for 2019 (i.e. what amount is recognizable)? (6 points) d. Regardless of your answer in a.- C., assume that Angela's gross income is $182,000 and she used Head of Household as her filing status. Use the individual tax formula and the appropriate Federal Tax Schedule to calculate Angela's 2019 tax due.

Answer 1

a) As per the information angela is widower whose husband has passed away last year and has dependent child and as per the federal Tax rules Angela falls under category of Qualifying widower which means a person can retain a status of married filling jointly for  two years after the death of the spouse , and has benfits of filling income tax  rates as per married filling jointly and higher standard deduction.

So angela can retain this file in staus of married filling jointly as her husband has died last year only because she qualifies for the status qualifing widower .

so Anglea  falls under the category of married filling jointly.

b)Realizable income means income which is earned by a person in a year but hasn't  received in hand of person and expect to receive in future.

so the two income which falls in this criteria for angela is

1- muncipal bonds of $10000 which has interest rate of 2%

therefore 10000 * 2% = $200

2 Us tresurary bill of $10000 which has interest rate of 3%

therefore 10000* 3%= $300

so total realizable income of angela = $200 +$ 300

= $ 500

c) Gross income Means income which is recieved by a person before tax from all sources and it is not compulsory that it should be received in cash .

For year 2019 Gross Income Of Angela Includes following transaction

1-salary = $ 175000 is fully Taxable as per federal Tax laws

2- Interest recieved from muncipal bonds of $ 200 is exempt as per federal tax laws on the federal and state level

3- Interest Received from US treasury bill Of $ 300 is Taxable as per Federal TAx laws which is at federal level and taxable at state level

So total Gross Income as per federal level  = $175000+$ 300

So total Gross Income for 2019= $ 175300

d) Calculation of federal Tax liability

Particulars	Amount($)
Gross Income	182000
less standard deduction as per head of house hold	-18350
Taxable income	163650
Tax liability on base bracket of head of house hold	31322	10% of 13850 =1385 12% of 52850 -13850 =4680 22% of 84200-52850 = 6897 24% of 160700-84200= 18360 total =31322
Tax liability on excess over base@32%	944	($163650- $160700 )=2950*32% =944
total federal tax	32266	=31322+944
lesschild tax credit	-2000	2000$ allowed as federal tax
lessdependent credit	-500
federal tax liability due	$29766