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CHAPTER 15-17 SOLUTIONS

# CHAPTER 15-17 SOLUTIONS - CHAPTER 15 PROBLEMS 31 Reba’s...

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Unformatted text preview: CHAPTER 15 PROBLEMS 31. Reba’s taxable income \$190,000 Plus: Positive AMT adjustments 75,000 Tax preferences 30,000 Less: Negative AMT adjustments (70,000) Equals: AMTI \$225,000 Less: Exemption [\$46,700 – 25%(\$225,000 – \$112,500)] (18,575) Equals: AMT base \$206,425 Figure 15.2 32. a. Calculation of regular income tax liability: Tax on \$160,000: On \$82,250 \$ 16,750 On \$77,750 × 28% 21,770 \$ 38,520 Calculation of AMT: Taxable income \$160,000 Adjustments 40,000 Tax preferences 35,000 AMTI \$235,000 Exemption [\$46,700 – 25%(\$235,000 – \$112,500)] (16,075) AMT base \$218,925 Rate: 26% × \$175,000 \$45,500 28% × \$43,925 12,299 Tentative AMT \$ 57,799 Regular income tax liability (38,520) AMT \$ 19,279 b. Arthur’s total tax liability is \$57,799, the summation of the regular tax liability of \$38,520 and the AMT of \$19,279. Figure 12.2 50. Bill’s itemized deductions for regular income tax purposes total \$48,400 while his AMT itemized deductions are \$29,200. This results in a positive AMT adjustment of \$19,200. Details are shown below: Regular Income Tax AMT Adjustment Medical expenses (Note 1) \$ 3,500 \$ 1,000 \$ 2,500 State income taxes 3,200 –0– 3,200 Personal property tax 2,000 –0– 2,000 Real estate tax 8,400 –0– 8,400 Interest on personal residence 12,200 12,200 –0– Interest on vacation home (never 3,800 3,800 –0– rented to others) Interest on home equity loan (proceeds 2,700 –0– 2,700 1 were used to buy a new automobile) Investment interest expanse 3,300 3,300 –0– Charitable contribution 5,000 5,000 –0– Casualty loss (Note 2) 3,000 3,000 –0– Unreimbursed employee expenses 400 –0– 400 (Note 3) Gambling losses 900 900 –0– Totals \$48,400 \$29,200 \$19,200 Notes Note 1 – medical expenses adjustment Regular income tax deduction [\$11,000 – (7.5% × \$100,000)] \$3,500 AMT deduction [\$11,000 – (10% × \$100,000)] ( 1,000) Positive adjustment \$2,500 Note 2 – casualty loss deduction For regular income tax: Casualty loss before 10% floor \$13,000 10% of AGI (10,000) Casualty loss deduction \$ 3,000 For AMT Casualty loss before 10% floor \$13,000 10% of AGI (\$100,000) (10,000) Casualty loss deduction for AMT \$ 3,000 Note 3 – deduction for unreimbursed employee expenses Unreimbursed employee expenses \$ 2,400 2% of AGI (2,000) Regular income tax deduction for unreimbursed employee expenses \$ 400 pp. 15-17 to 15-20 CHAPTER 15 CUMULATIVE PROBLEM 64. Robert and Jane have taxable income for 2008 as follows: Salary for Robert (Indiana Foundry, Inc.) \$ 95,000 Salary for Jane (Carmel Computer Associates) 110,000 Interest income (Carmel National Bank)(Note 1) 2,900 Dividend income (Able Computer Corporation) 15,000 Gambling income (Note 3) 4,500 Award income (Note 4) 5,000 Capital gain (Note 5) 19,000 Adjusted gross income \$251,400 Deductions from AGI Itemized deductions: Medical expenses: \$21,000 – \$18,855 [(7.5% × \$251,400 AGI) rounded] \$ 2,145 State income tax (\$4,900 + \$5,500) (Note 2) 10,400 2 Real property tax on personal residence...
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CHAPTER 15-17 SOLUTIONS - CHAPTER 15 PROBLEMS 31 Reba’s...

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