Question

3 Required information Problem 4-29 (LO 4-1) (Algo) [The following information applies to the questions displayed below.] ge ts' er d O Jeremy earned $101,700 in salary and $7,700 in interest income during the year. Jeremy's employer withheld $11,000 of federal income taxes from Jeremy's paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $30,700 in itemized deductions. (Use the tax rate schedules.) et Problem 4-29 Part-b (Algo) b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $12,050. What is Jeremy's tax refund or tax due including the tax on the capital gain? (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Du hot iblcom

Answer 1

Answers:

b.)

Computation of Jeremy's (Tax Refund) / Tax Due for Tax Year 2020

.	Description	Explanation	Amount ($)
(1)	Gross income	Salary + Interest income + Long-term capital gains	1,21,450
(2)	For AGI deductions	-	0
(3)	Adjusted gross income	(1) + (2)	1,21,450
(4)	Standard deduction	Standard deduction for head of household	18650
(5)	Itemized deductions	Given in question	30700
(6)	Greater of standard deduction or itemized deductions	Greater of: (4) or (5)	30700
(7)	Taxable income	(3) - (6)	90750
(8)	Income tax liability	Refer working note - (1)	16,225.5
(9)	Child tax credit	$2000 per child	2000
(10)	Tax withholding	Given in question	11000
Tax Due		3,225.5

# Working note - (1) - Computation of Jeremy's Tax Liability for Tax Year 2020 -

	Tax Rate	Taxable Income ($)	Calculation	Amount ($)
I.	10%	0 - 14,100	$14,100 * 10%	1,410
II.	12%	14100 - 53700	($53700 - $14100) * 12%	4752
III.	22%	53700 - 85500	($85500 - $53700) * 22%	6996
IV.	24%	85500 - 163,300	($90,750 - $85500) * 24%	1,260
Regular income tax	I + II + III + IV	14,418
Add: Long-term capital gains tax	$12050 * 15%	1807.5
Jeremy's Tax Liability	$12544 + $908	16,225.5

.

c.)

Computation of Jeremy's (Tax Refund) / Tax Due for Tax Year 2020

	Description	Explanation	Amount ($)
(1)	Gross income	Salary + Interest income	109400
(2)	For AGI deductions	-	0
(3)	Adjusted gross income	(1) + (2)	109400
(4)	Standard deduction	Standard deduction for head of household	18650
(5)	Itemized deductions	Given in question	7000
(6)	Greater of standard deduction or itemized deductions	Greater of: (4) or (5)	18650
(7)	Taxable income	(3) - (6)	90,750
(8)	Income tax liability	Refer working note - (1)	14,418
(9)	Child tax credit	$2000 per child	2000
(10)	Tax withholding	Given in question	11000
Tax Due	(8) - (9) - (10)	1,418

.

# Working note - (1) - Computation of Jeremy's Tax Liability for Tax Year 2020 -

	Tax Rate	Taxable Income ($)	Calculation	Amount ($)
I.	10%	0 - 14,100	$14,100 * 10%	1,410
II.	12%	14100 - 53700	($53700 - $14100) * 12%	4752
III.	22%	53700 - 85500	($85500 - $53700) * 22%	6996
IV.	24%	85500 - 163,300	($90,750 - $85500) * 24%	1,260
Jeremy's Tax Liability	I + II + III + IV	14,418