Question

Jan and Sam have all of their 2018 tax documents ready to bring to George to prepare their return. These documents include a W-2 for Jan ($52,300), a W-2 for Sam ($48,700), a state tax refund of $475, canceled debt income of $1,800 for Jan, and state lottery winnings of $2,000. They never itemize deductions. What will be their total on Form 1040, line 7? Select one: a. $105.275 b. $104,800 c. $103,275 d. $103,000?

Answer 1

Answer:

Correct answer is:

$104,800

Explanation:

Line 7 of Form 1040, is adjusted gross income:

AGI for Jan and Sam = Salary Income + Cancelled debt income + Lottery winnings = 52300 + 48700 + 1800 + 2000 = $104,800

As they never itemize deductions, state tax refund is not taxable.

Hence option b is correct and other options a, c and d are incorrect.