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Various Taxation Questions

1. Tom and Linda are married taxpayers who file a joint return. They have itemized deductions of $11,750 and four exemptions. Assuming an adjusted gross income of $40,000, what is their taxable income for 2010?

2. Compute Marie's taxable income for 2010, assuming she is single and claims two dependent children. Her adjusted gross income is $70,000, and she has itemized deductions of $9,000.

3. Duke and Pat Collins have adjusted gross income of $500,000 for 2010. They have itemized deductions of $20,000 consisting of $8,000 in medical expenses that exceed 7.5% of adjusted gross income, $3,000 in property taxes, $4,000 in household interest, and $5,000 in miscellaneous itemized deductions that exceed 2 percent of adjusted gross income. What is the amount of their itemized deductions?

4. Mr. Z, a nondealer, sold assets on an installment plan. Determine Mr. Z's gross income for 2010. Relevant data include:

Year Install Sales Gross Profit 2010 Collections
2008 $200,000 $50,000 $25,000
2009 $300,000 $81,000 $80,000
2010 $400,000 $96,000 $125,000

5. Bill is a cash-basis, calendar-year taxpayer. Which of the following December items result in gross income or deductions for the current year?

a. Check received for December rent, $700, not deposited until January 4
b. Check for $1,100 to pay Bill' state income taxes mailed December 28, cashed January 7
c. Cash received in the amount of $500 for services to be rendered the following year
d. Interest of $800 credited to his savings account, added to Bill's account balance
e. Check received for January rent, $700, deposited on January 9
f. Charitable contribution of $300, charged on Bill's MasterCard
g. Bills totaling $2,000 sent for services rendered during the year, uncollected as of year-end

Solution Preview

1. Tom and Linda are married taxpayers who file a joint return. They have itemized deductions of $11,750 and four exemptions. Assuming an adjusted gross income of $40,000, what is their taxable income for 2010?

Adjusted gross income $40,000
Itemized deductions (11,750) (The standard deduction is only $11,400)
Exemptions (14,600) ($3,650*4)
Taxable income $13,650 ($40,000-$11,750-$14,600)

2. Compute Marie's taxable income for 2010, assuming she is single and claims two dependent children. Her adjusted gross income is $70,000, and she has itemized deductions of $9,000.

Adjusted gross income $70,000
Itemized deductions ( 9,000) (The standard deduction is only $5,700)
Exemptions ...

Solution Summary

This solution responds to questions on the following tax-related topics: (1) computing taxable income; (2) amount of itemized deductions; (3) income recognized in a year under the installment method; and (4) cash-basis income and deductions. (The last response includes citations.)

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