Question

Problem 3-37 (LO. 1, 2, 3, 4, 5, 6, 8) Morgan (age 45) is single and provides more than 50% of the support of Rosalyn (a family friend, age 36), Flo (a niece, age 18), and Jerold (a nephew, age 18). Both Rosalyn and Flo live with Morgan, but Jerold (a citizen of France) lives in Canada. Morgan earns a $95,000 salary, contributes $5,000 to a traditional IRA, and receives sales proceeds of $15,000 for an RV that cost $60,000 and was used only for vacations. She incurs $8,200 in itemized deductions Click here to access the standard deduction table to use if required. a. Morgan's taxable income is $ b. Using the Tax Rate Schedules (click here), tax liability for Morgan is $ for 2018. c. Compute Morgan's dependent tax credit. Basic Standard Deduction Amounts Exhibit 3.4 Filing Status 2018 2017 Single $12,000 6,350 Married, filing jointly 24,000 12,700 Surviving spouse 24,000 12,700 Head of household 9,350 18,000 Married, filing separately 6,350 12,000 2018 Tax Rate Schedules Single-Schedule X Head of household-Schedule Z If taxable If taxable of the of the But not income is: But not income is: amount amount Over The tax is: Over The tax is: over- over Over over 0 $9,525 .......10% $13,600 0 0 $ .....10% 38,700 $ $1,360.0012% 9,525 952.50+12% 9,525 13,600 51,800 13,600 38,700 82,500 82,500 4,453.50 22% 38,700 51,800 5,944.00 22% 51,800 157,500 82,500 157,500 14,089.50 249% 82,500 82,500 12,698.00 24% 82,500 200,000 157,500 157,500 157,500 200,000 32,089.5032% 30,698.00 32% 157,500 + 200,000 200,000 500,000 45,689.50 35% 200,000 500,000 44,298.00 35% 200,000 150,689.50 37% 500,000 500,000 500,000 149,298.0037% 500,000 Married filing jointly or Qualifying widow (er) Schedule Y-1 Married filing separately-Schedule Y-2 If taxable of the If taxable of the But not income is: But not income is: атount amount Over The tax is: Over The tax is over- over over- over- $ 19,050 ....1 0% $9,525 $ ....10% $ 0 0 0 $ 952.50 12% 77,400 19,050 1,905.0012% 19,050 9,525 38,700 9,525 77,400 165,000 8,907.00 22% 77,400 38,700 82,500 4,453.5022% 38,700 165,000 157,500 165,000 315,000 28,179.00 24% 82,500 14,089.5024% 82,500 64,179.00 32% 200,000 315,000 400,000 315,000 157,500 32,089.5032% 157,500 400,000 600,000 91,379.00 35% 400,000 200,000 300,000 45,689.5035% 200,000 600,000 161,379.0037% 600,000 300,000 80,689.5037% 300,000

Answer 1

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Solution: highlighted in yellow As per Year 2018 tax rules: Answera are RV is a personal asset, no loss on sale of personal asset is deductible: Morgan is eligile for filing as "Head of household": Particulars Amount $ Salary 95,000 IRA Deduction 5,000 AGI 90,000 Greater of standard and itemized deduction 18,000 $ 72,000 a) Taxable Income liability for Morgan is $ 10,388 for 2018. b) Tax (5944)+(72000-51800) 22% c) Only 2 out 3 dependent qualify for Dependent credit, therefore, Morgan's dependent tax credit (500*2) 1,000