Question & Answer: Gary earned $7,000 as an executive. Gary, who is single, supported his half sister, who lives in a nursing home. Gary received the following interest…..

Matt and Sandy reside in a cause of disputes with his wife, Sandy. Subsequu home in April, Matt earned $3,000. Sandy was unaware of MIAlls whcTCa earnings afer he left home. The $3,000 earned by Matt before he left om or ood, housing, and other items shared by Matt and Sandy. Matt and Sandy havs s who lived with Sandy after the husband left home. a. Is any portion of Matts earnings after he left home taxable to Sandy? b. What filing status is applicable to Sandy if she filed a return? c. How much income would Sandy be required to report if she filed? d. Is Sandy required to file? 3.55 one c 3-56 Gary earned $$7,000 as an executive. Gary, who is single, supported his half sister,w lives in a nursing home. Gary received the following interest: $400 on City of Los A bonds, $20 0 on a money market account, and $2,100 on a loan made to his brother Gary spent one week serving on a jury and received $50. Gary received a refund of federal income taxes withheld during the prior year of $1,200 and a state income tax refund of $140. Gary had itemized deductions last yeard $8,000 which included $1,000 of state income taxes Gary received qualified dividends from Ace Corporation of $1,000 and from Tray Cos poration of $1,400. Garys itemized deductions equal $9,000, and withholding income taxes is $8,000. Compute Garys tax due or refund due. TAX STRATEGY PROBLEMS that income earned by the corporation will be reported by shareholders even o not receive distributions. Kamal has $180,000 of income from other sou temized deductions totaling $15,000. He expects that the new busines duce $30,000 of income each year. He is considering gi stock in the corporation, Rashid

Gary earned $7,000 as an executive. Gary, who is single, supported his half sister, who lives in a nursing home. Gary received the following interest: $400 on City of Los Angeles bonds, $200 on a money market account, and $2,100 on a loan made to his brother. Gary spent one week serving on a jury and received $50. Gary received a refund of federal income taxes withheld during the prior year of $1,200 and a state income tax refund of $140. Gary had itemized deductions last year of $8,000 which included $1,000 of state income taxes. Gary received qualified dividends from Ace Corporation of $1,000 and from Tray Corporation of $1,400. Gary’s itemized deductions equal $9,000, and withholding income taxes is $8,000. Compute Gary’s tax due or refund due

Expert Answer

Compute Gary’s tax due or refund due.

Computation:

Salary as an Executive = $57,000

Interest income* = $2,100

Service income as jury = $50

State income tax refund ** = $140

Adjusted Gross Income = $59,290

Less:

Itemized deductions# = ($9,000)

Personal Exemption = $4,050

Dependent Exemption = $4,050

Taxable Income = ($42,190)

Tax Due:

$37,651 to $91,150

$5,183.75 + 25% of $37,650 = $6,318 ($5,183.75 + 25% of ($42,190 – $37,650)

Tax on Qualified Dividends = $360 ($2,400 * 15%)

Total Tax due = $6,678

Less:

Federal withholdings = ($8,000)

Tax Refund = $1,322

*Interest Income:

Interest Income from municipal bonds are exempted.

**Federal Income tax refunds are exempted and state income tax refunds are taxable to the extent of previous year itemized deduction.

#itemized deduction for gray is $9,000, and standard deduction for 2016 is $6,000.

Qualified dividends are taxable at long term capital gain tax rate of 15%. (Margin tax rate is 20%)

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