CHANG SU - ACCTG-360(SP 2010 Midterm Exam CHANG...

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Problem 1 Taxable Salary income from SFGH Foundation 700,000 Interest income from IBM bonds 70,000 Interest income from US Virgin Island bonds -- Nontaxable 0 Less: paid alimony to ex-hushand (15,000) Answer "A" -- ADJUSTED GROSS INCOME 755,000 Interest expense on IBM bonds limited to $62,500 (62,500) Interest expense on US Virgin Island bonds -- non deductible 0 Regular home mortgage interest 125,000 Loan fee 50,000 Deductable mortgage interest (125,000 + 50,000)*(1.1/2.5) (77,000) Medical insurance (15,000) Dental bills (115,000) Medical mileage at 3,600*24 cents/mile (864) Subtotal medical expense (130,864) Less 7.5% of AGI 56,625 Deductible medical expense (74,239) Property taxes (27,000) California income taxes (60,000) (18,000) Financial Consulting (7,500) Total misc itemized deductions (25,500) Less 2% of AGI 15,100 Allowable misc itemized deductions (10,400) Subtotal for itemized deductions (311,139) Less 1% of AGI > $166,800 5,882 Allowable itemized deductions (305,257) Standard deduction for head of household (8,350) Standard deduction (8,350) GREATER OF STANDARD DEDUCTION OR ITEMIZED (305,257) Exemptions of $3,650*2=$7,300 - phased out to MIN of 1/3*$7,300 exemptions (4,867) ANSWER "B" - TAXABLE INCOME 444,876 JOINT RATES SINGE SHE'S A HEAD OF HOUSEHOLD HofH tax rates on first 372,950 104,892.50 Excess at 35% 71,926 25,174.22 Total Regular Tax before credits 444,876 130,066.72 130,067 ACCTG-360 (SP 2010) Midterm Exam --- CHANG SU(ID#:0555053)
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Child tax credits of $1,000 ($1K/child under age 17) - all phased out due t 1,000 0 Less: dependent care credit for children UNDER age 13 Less of $9,000 paid for child care or MAX of 3,000 Credit rate (20% of AGI > $43,000) 20% (600) ANSWER "C" - NET TAX LIABILITY (Ignoring AMT) 129,467
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Problem 2 Taxable Salary income from Warner Brothers 80,300 Life insurance -- Nontaxable 0 Insurance settlement for damages to left leg -- Nontaxable for physical injury 0 Insurance settlement for damages to her personal reputation 7,000 ANSWER "A" -- ADJUSTED GROSS INCOME 87,300 Unreimbursed medical expenses (4,500) Less 7.5% of AGI 6,548
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CHANG SU - ACCTG-360(SP 2010 Midterm Exam CHANG...

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