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    Taxable income and Liability

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    to be able to understand the problem can you please show details and reasoning for your computation.

    1) The following information is available for Sam and Sally Wells, a married couple filing a joint return, for 2007:

    Salary (earned by Tom) $100,000
    Interest income 12,000
    Deductible IRA contributions 8,000
    Itemized deductions 11,000
    Exemptions 6,800
    Withholding 15,000

    a.     What is the amount of their gross income?
    b.     What is the amount of their adjusted gross income?
    c.       What is the amount of their taxable income?
    d.    What is the amount of their tax liability (gross tax)?
    e.       What is the amount of their tax due or (refund due)?

    2) Carla, a single taxpayer, had the following income and deductions for the tax year 2006:

    Salary $70,000
    Business income 30,000
    Qualifying dividends 10,000
    Tax-exempt income 20,000
    TOTAL INCOME $130,000

    Business expenses $20,000
    Itemized deductions 12,000
    Personal exemption 3,400

    a) What is Carla's taxable income and tas liability for the year?

    b) What are Carla's marginal, average, and effective tax rates?

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    Solution Summary

    Taxable income and liability issues are emphasized.