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Calculating AGI and Types of Deductions

34. Carlton received the following income and incurred and paid the following expenses during the current year:

Salary income $72,000
Dividend income 4,000
Interest income 3,000
Contributions to First Church 2,500
Real estate taxes on personal residence 1,800
Alimony paid to former spouse 12,000
Contribution to traditional IRA 3,000
Mortgage interest on personal residence 6,000
State income taxes 3,500
Loss on the sale of stock 900

Carlton is not yet eligible to participate in his employer's retirement plan.

a. Calculate Carlton's AGI.
b. Should Carlton itemize deductions from AGI or take the standard deduction?

Solution Preview

Please see response attached, which is also presented below. I hope this helps Best of luck!

RESPONSE:

34. a. Carlton's AGI is calculated as follows:

Gross income:
Salary income $72,000
Dividend income 4,000
...

Solution Summary

Referring to the scenario of Carlton who is not yet eligible to participate in his employer's retirement plan, this solution calculates Carlton's AGI and explains whether Carlton should itemize deductions from AGI or take the standard deduction.

$2.19