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Calculate Sally's AGI, Taxable Income and Income Tax

PROBLEM I
Sally is age 28. Sally is single. Sally is a C.P.A. but has become disenchanted with the business world and she is taking some time to find herself. She has spent 2007 living with a series of friends. Although she has received some financial assistance from family members there is no person or group of people that qualify to claim her as a dependent for tax purposes. During 2007 she did some work as a self employed house cleaner. She had the following items for 2007.
i. Received \$10,400 for house cleaning.
ii. Paid \$1,875 in deductible transportation expenses.
iii. Paid \$3,125 in deductible cleaning supplies and equipment rentals.
iv. Paid \$1,900 for medical insurance for herself.
vi. Spent \$9,300 from savings.

IGNORE ANY STATE TAXES

REQUIRED:

A. Calculate Sally's AGI for 2007.
B. Calculate Sally's Taxable Income for 2007.
C. Calculate the total tax due (refund), if any, after all taxes and applicable credits, if any.

SUGGESTED POSSIBLE RESEARCH AIDS:
INTERNAL REVENUE CODE SECTIONS:
32(c)(2)
162(l)
1402(a)

Solution Summary

The solution in Excel is a detail of the amounts which would show on an income tax form.

\$2.19