C16-44 - ANSWER KEY Dillon’s net U.S. tax liability is...

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Unformatted text preview: ANSWER KEY Dillon’s net U.S. tax liability is calculated as follows: Salary and allowances Housing allowance Total Minus: Sec. 911 exclusion (2010) Housing cost exclusiona Gross income Minus: For AGI deductions Adjusted gross income Minus: Standard deduction Personal and dependency exemptions (2 x $3,650) Taxable income a $175,000 28,000 $203,000 ( 91,500) ( 15,630) $ 95,870 -0$ 95,870 ( 11,400) ( 7,300) $ 77,170 Housing cost exclusion = $30,000 - $14,640 = $15,630. Other itemized deductions Employment related expensesb Minus: 2% of AGI floor Total itemized deductions $3,542 (1,917) 1,625 $5,625 b Disallowed expenses = $7,500 x $91,500 + $15,630 = $3,958. $203,000 Employment related expenses allowed = $7,500 - $3,958 = $3,542. Dillon claims the greater of the $11,400 standard deduction or the $5,625 of itemized deductions. Gross U.S. tax liability [$9,362.50 + 0.25 ($77,170 - $68,000)] Minus: Foreign tax creditc Net U.S. tax liability c Disallowed foreign taxes = $12,000 x $91,500 + $15,630 = $6,333. $203,000 Foreign tax credit = $12,000 - $6,333 = $5,667. pp. C:16-8 through C:16-13. $11,655 ( 5,667) $ 5,988 ...
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