2. Shela is single and works for a law firm. In the 2016 tax year, she made $110,000 this year in
salary and $10,000 of gross interest income from a corporate bond. Her law firm withheld
$16,000 of tax from her salary this year. In addition to the above, the following occurred this
She paid $7,000 in interest on her mortgage for her primary residence.
BELOW - ALL
She had a rental loss (had greater expenses as a land lord than revenue) by $2,000.
ABOVE - ALL
She sold stock she had held for 9 months at $4,000 less than her tax basis at the time of
ABOVE - $3,000 (CARRYFORWARD $1,000).
Shela owned a 20% interest in a partnership during the year. The partnership had a
$20,000 loss from operations during the year and made no distributions.
ABOVE – 20%
X $20,000 = $4,000
Shela volunteers for the Red Cross using her legal skills to do administrative work for the
charity. She estimates her time volunteering is worth $5,000.
NO DEDUCTION ON
SERVICE FOR CHARITABLE ORGANIZATION.
This time. I will accept the answers in green below as well if you had done the problem
including the bullet instead. However, I will not do so in the future. Make sure you check your
email/Blackboard to be on top of communications for the course. – note to self for next year –
remove all the green.
Use individual tax formula
Wages and interest income = $120,000
FOR AGI = - $2,000 - $3,000 - $4,000 = – $9,000
AGI = 111,000
DED. POSSIBLE = – $7,000
USE ITEMIZED DEDUCTION
TAXABLE INCOME: $99,950
TAX DUE (REFUND): $3,990
A) $111,000 AGI.
B) $7,000 or
OF ITEMIZED DEDUCTIONS POSSIBLE