Key Spring 2011 II

Key Spring 2011 II - 79 Belinda is trying to decide whether...

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79. Belinda is trying to decide whether she should accept employment as a salesperson or work as a self-employed sales representative. The salesperson job pays \$70,000 and includes \$3,600 of insurance benefits under a qualified health plan. In contrast, the sales representative position pays \$90,000 but Belinda would also need to pay self employment tax of \$12,700 and purchase health insurance for \$4,000. To help Belinda decide, compute her AGI for both positions. \$70,000 and \$79,650 = (\$90,000 - (\$12,700 x 1/2) - \$4,000). Feedback: The AGI for the salesperson is \$70,000 (the insurance benefits are excluded from gross income). The AGI for the sales representative is the compensation less the deduction for half of the self employment tax and the deduction for self employed heal insurance. AACSB: Analytic AACSB: Reflective Thinking AICPA: Critical thinking Bloom's: Analysis Learning Objective: 06-01 Identify the common deductions necessary for calculating adjusted gross income (AGI) Level of Difficulty: Medium

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98. Jon and Holly are married and live in a retirement community. This year Jon celebrated his 65 th birthday and Holly turned 68 years old. For their ages, both Jon and Holly are in good health. This year the only significant expense that they incurred was an unreimbursed medical expense of \$3,200. If Jon and Holly together have AGI of \$42,000, what is the amount of their standard deduction this year?
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