Question

Applicable Tax Year: 2019 John Q. Public (age 49) and his wife Karen (age 46) file a joint return. They have three children: Elizabeth (age 24) who is a full time law student at State Law School, Charles (age 21), who is a full time student at State College, and William (age 19). Charles earned $5,000 and Elizabeth earned $7,000 from summer jobs. John and Karen provide over half the suppor for all three children. Karen's mom (age 75), who is blind, resides in a nursing home. She received $25,000 in social security benefits. John and Karen provide over one-half of the mom's support. The couple received salaries totalling $150,000, qualified business income of $13,000 from a partnership investment, $4,000 of interest income from a State of IL municipal bond, and $2,000 of interest income from a savings account. They sold their home this year for $575,000. They initially purchased their home three years ago for $450,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. Publics incurred $23,000 of itemized deductions and had $21,500 of federal tax withheld from their paychecks.

Using the income tax formula for an individual taxpayer, calculate the John's(family) taxable income, federal tax arising from that taxable income, and any refund or balance due (note, it is important to show your work, and not just the final answers).

Answer 1

Answer :

Given,
Name	Age	Earnings
John Q.Public	49	$    1,50,000.00
Karen	46
Elizabeth	24	$          7,000.00
Charles	21	$          5,000.00
William	19
Karen's Mom	75	$        25,000.00
Capital gain- Sale of House Property
Purchased Cost (3yrs ago)	$ 4,50,000.00
Sale	$ 5,75,000.00
Other Information
Deductions	$      23,000.00
Federal Tax	$      21,500.00
Income from Partnership Investment	$      13,000.00
Interest Income
State Municipal Bond	$        4,000.00
Savings Account	$        2,000.00
calculate the John's(family) taxable income :
Particulars		Amount
Income From Salary
Salary of John & Family	$ 1,87,000.00
Less:
Deductions	$      23,000.00
Federal Tax	$      21,500.00
Net Income From Salary		$    1,42,500.00
Income From House Property		$                       -
Income From Business		$        13,000.00
Income From Capital gains(20%)
Purchased Cost	$ 4,50,000.00
Sale	$ 5,75,000.00	$    1,25,000.00
Income From Other Sources		$          6,000.00
Total Income		$    2,86,500.00
Tax on Capital Gains @ 27.82%		$        34,775.00
Tax on Income From Partnership @ 23.2%		$          3,016.00
Tax on other than capital gains & Partnership Income @ 22%		$        32,670.00
Total tax payable		$        70,461.00