Wk 2 Comprehensive Problem 41 (Ch.4) Acc-547

41. Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents. Their income from all sources this year (2009) totaled $200,000 and included a gain from the sale of their home, which they purchased a few years ago for $200,000 and sold this year for
$250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions.

a. What is the Jackson’s taxable income? $111,600

realized income $200,000 minus excluded income $ 50,000 (gain from sale of house) gross income $150,000 minus for AGI deductions $ 0
Adjusted gross income $150,000 minus itemized deductions $ 16,500 (larger than standard deduction) subtotal $133,500 minus exemptions $ 21,900 (personal & dependency)
Taxable income $111,600

b. What would their taxable income be if their itemized deductions totaled
$6,000 instead of $16,500? $116,700

AGI $150,000 minus standard deduction $ 11,400 (married filing jointly) subtotal $138,600 minus exemptions $ 21,900 (personal & dependency)
Taxable income $116,700

c. What would their taxable income be if they had $0 itemized deductions and
$6,000 of for AGI deductions? $110,700

Gross income $150,000 minus for AGI deductions $ 6,000
AGI $144,000 minus standard deduction $ 11,400 subtotal $132,600 minus exemptions $ 21,900 (personal & dependency)
Taxable income $110,700

d. Assume the original facts except that they also incurred a loss of $5,000 on the sale of some of their investment assets. What effect does the $5,000 loss have on their taxable income? $108,600

They would be only able to deduct $3,000 of the loss on their 2009 return, but could carryover the leftover $2,000 of the loss to the next year. So their taxable income for 2009 would be $108,600 ($111,600 -