Computing Taxable Income and Tax Due or Refund
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Introduction:
Lisa is single has a dependent child, Ava, who lives with her. After her divorce, Lisa, was awarded the permanent custody of Ava, and has not agreed to waive her right to claim Ava as a dependent.
Task:
Compute Lisa's taxable income and her net tax due or refund expected for 2005.
Lisa has the following items as income and expenses in:
Income:
Salary $60,000
Cash dividends 3,000
Interest income on City of New York bonds 5,000
Interest income on U.S. Treasury bills 4,000
Net rental income 3,500
Alimony received from ex-husband 2,500
Child support received from ex-husband 3,500
Sales of capital assets:
Stock held for 3 months (basis is $12,000) sold for 18,000
Investment land held 5 years (basis is $30,000) sold for 14,000
Life insurance proceeds received on the death of her mother 100,000
Expenses:
Home mortgage interest 6,000
Property taxes on home 2,000
Charitable contributions 7,000
Qualifying child care expense 3,700
Federal income tax withheld 8,000
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Solution Summary
Lisa is single has a dependent child, Ava, who lives with her. After her divorce, Lisa, was awarded the permanent custody of Ava, and has not agreed to waive her right to claim Ava as a dependent.
Task:
Compute Lisa's taxable income and her net tax due or refund expected for 2005.
Lisa has the following items as income and expenses in:
Income:
Salary $60,000
Cash dividends 3,000
Interest income on City of New York bonds 5,000
Interest income on U.S. Treasury bills 4,000
Net rental income 3,500
Alimony received from ex-husband 2,500
Child support received from ex-husband 3,500
Sales of capital assets:
Stock held for 3 months (basis is $12,000) sold for 18,000
Investment land held 5 years (basis is $30,000) sold for 14,000
Life insurance proceeds received on the death of her mother 100,000
Expenses:
Home mortgage interest 6,000
Property taxes on home 2,000
Charitable contributions 7,000
Qualifying child care expense 3,700
Federal income tax withheld 8,000
Solution Preview
For purposes of this exercise, I assume that Lisa's filing status is "head of household."
Salary $60,000
Cash dividends 3,000
Interest income on U.S. Treasury bills 4,000
Net rental income 3,500
Net deductible capital loss ( 3,000)
Alimony received from ex-husband 2,500
Adjusted gross income $70,000
Itemized deductions:
Home mortgage interest ...
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