Question

30 pts Question 1 Jessie, age 53, is a single taxpayer. She earns a salary of $90,000. Her employer puts $5,000 into a qualified pension plan on her behalf and Jessie puts $7,000 in her pension plan. Her employer provides all employees with group-term life insurance equal to their salary ($90,000). Jessie put $2,000 in her flexible benefits plan. Her allowable deductions for AGI total $4,200 and she has $10,100 of allowable itemized deductions. In addition, Jessie received interest income of $1,700 from Payne County municipal bonds. Jessie won $2,200 of cash and prizes when she went on the TV show Wheel of Fortune. Jessie had the following capital gains and losses: LTCG $10,000, LTCL $4,000, and a STCL $4,000. Determine Jessie's taxable income according to the tax return formula and then calculate income tax liability. Please show all calculations, including your capital gain/loss calculation, (list each item separately rather than grouping items together). You must write all lines of the tax return formula and label each number to receive credit. (30 points)

Answer 1

Answer: 1 Summarized the data provided in the questions Jessie, age 53 is a single taxpayer Jessie Total Income and Tax liability: "Income under the head sálosey; Gross Salary $90,000 Life insurance $90,000 • Deduction, Qualified pension plan (emploger) $5,000 Qualified pension plan (Jessie) $7,000 flexible benefits plans 9,000 Deduction for AGI $4,200 Itemized deduction $10,100 uniform premium $248.4* * cost pes $1000 of protectie -- anually 2.76 ($ 90000/1000x2.76) Total $1,51,452 •Income from other sources, $1,700 cash prizes $2,800 $ 155, 352 *Tax liability on total income $31,383-24 7 As if Jessie's income is more than 85, 526 but not over 1,63,300 then the tax is (14, 605.50 +24+7) Interest Income Total

9 LTCG (14605.50 +16758.24) (69236 x945)) Capital Gain a Tax liability $10,000 E) set off LTCL & STCL $4,000 $4,000 Total $ 2,000 Tox liability > According to Capital Tax rates outs income is less than 40,000 thus 0% tax bate. *
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