Question

Accounting 240 Income Tax Homework Problem III. Barack and Michelle Obama, a married couple with three daughters, have income and expenditures for the year as followed:

Homework Problem III Barack and Michelle Obama*, a married couple with three daughters (age 15, another an 18 year old freshman at GCC and the oldest is 23 and a full-time graduate student at ASU West), have income and expenditures for the year as follows. They file a joint return. Salaries (60,000 and $25,000) Speaking fees earned Interest income from: $85, 000 10,000 2, 000 3, 000 50,000 20,000 3, 000 Bank account Maricopa Community College bonds Inheritance received Gift from parents Contribution to Traditional I.R.A. (401k) Potential Itemized Deductions: Arizona Cardinals season tickets Food Interest expense on credit cards Interest expense on home mortgage Interest expense on car loans Property taxes paid (cars and home) Charitable contributions Federal income tax withheld 4,000 6,000 1,000 11,000 2, 000 2, 500 4,000 3,000 1,000 2,800 10,000 State income tax withheld Tuition and books paid to: GCC ASU Compute the amount of: a) taxable income, b) income taxes, and c) amount of tax to be paid (refunded) Note: It is not acceptable to submit this page as homework. Prepare answer, in good form, on a separate sheet IRS * Bill Clinton will have Secret Service protection for life. Due to a change in the law, Barack and Michelle Obama will only receive protection for 10 years after leaving office ACC 212/ 240 Income Taxes Page 18

Answer 1

Answer :

a)Compute the amount of taxable interest?

Taxable income of Barack and Michelle Obama :

Taxable income of Barack :

Particulars	Amount $
Salaries	85,000
Speaking fees earned	0
Interest amount from bank	2,000
Interest amount from maricopa college	0
Amount received	0
Parents gift	0
Total amount of Barack	= 85,000 + 2,000 =87,000

Taxable income of Barack = $ 87,000

Taxable income of Michelle Obama :

Particulars	Amount $
Contribution to traditional I.R.A	3000
Arizona seasonal tickets	0
Food cost	0
Interest of credit card	1000
Expenses on home mortage interest	11,000
Property tax paid	2,500
Charitable amount	2,000
Tuition and books cost GCC and ASU	2,800 0
Total amount of Michelle obama	= 3000 + 1000 + 11000 + 2500 + 2000 + 2800 =22,300

Taxable income of Michelle Obama = $ 22,300

Now we need to calculate taxable income of Barack and Michelle Obama

Taxable income = Total income of Barack - Total income of Michelle Obama

= $ 87,000 - $ 22,300

= 64,700.

Taxable income = $ 64,700.

Important points :

1)Speaking fees earned are not included income.

2)Interest income from maricopa college boond are included in tax.

3)Inheritance received on other states are exempt from tax.

4)Parents gifts are not included with tax.

5)I.R.A are tax deductible.

6)Arizona tickets are not deductible.

7)Food cost are not included with tax.

8)Interest expenses , Property taxes are tax deductible.

9)Tution books are tax deductible.

b)Compute the amount of Income taxes :

Taxable income = $ 64,700

Income tax = 64700 * 15 %

= 64700 * 0.15

= $ 9705

Income tax = $ 9705

c)compute the amount of tax to be paid ?

Amount of tax payable :

Amount of tax remaining = $ 9705

Particulars	Amount
Amount of tax remaining	$ 9705
Less:Federal income tax	$ 3000
less:State income tax Pay	$ 1000
Net value	=$ 9705 - $ 3000 - $ 1000 =$5705

Amount of tax payable = $ 5705