Johann and Marta are a married couple, both age 33. Johann works as a contract employee for the Ministry of Agriculture in Ontario, earning $58,000 a year. He has no business expenses associated with the work that he performs with the Ministry. As a contract worker, Johann is not entitled to group benefits. Marta is self-employed, working as an interior design consultant. Marta grosses $60,000 a year from her business, but typically has about $15,000 in tax-deductible variable business expenses (expenses that are only incurred if Marta works) annually. In addition to their earned incomes, the couple shares a total of $20,000 annually in investment income, which they report equally for income tax purposes. As well, Marta receives $5,000 a year (for the next 12 years) in trust income from a testamentary trust set up by her grandmother. The couple has contacted you to discuss their mutual need for disability insurance protection. 11. What sources of income would the insurance company take into consideration in determining the maximum amount of disability insurance coverage that they would issue on Johann? (A) Johann's gross salary only. (B) Johann's after-tax salary only.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter2: Income Tax Concepts
Section: Chapter Questions
Problem 81TPC
icon
Related questions
Question
100%
Johann and Marta are a married couple, both age 33. Johann works as a contract employee for the
Ministry of Agriculture in Ontario, earning $58,000 a year. He has no business expenses associated with
the work that he performs with the Ministry. As a contract worker, Johann is not entitled to group
benefits. Marta is self-employed, working as an interior design consultant. Marta grosses $60,000 a year
from her business, but typically has about $15,000 in tax-deductible variable business expenses (expenses
that are only incurred if Marta works) annually. In addition to their earned incomes, the couple shares a
total of $20,000 annually in investment income, which they report equally for income tax purposes. As
well, Marta receives $5,000 a year (for the next 12 years) in trust income from a testamentary trust set up
by her grandmother. The couple has contacted you to discuss their mutual need for disability insurance
protection.
11. What sources of income would the insurance company take into consideration in determining the
maximum amount of disability insurance coverage that they would issue on Johann?
(A) Johann's gross salary only.
(B) Johann's after-tax salary only.
(C) Johann's gross salary and the $10,000 of investment income, only.
(D) Johann's after-tax salary, the $20,000 of investment income and Marta's $5,000 of trust income only.
Transcribed Image Text:Johann and Marta are a married couple, both age 33. Johann works as a contract employee for the Ministry of Agriculture in Ontario, earning $58,000 a year. He has no business expenses associated with the work that he performs with the Ministry. As a contract worker, Johann is not entitled to group benefits. Marta is self-employed, working as an interior design consultant. Marta grosses $60,000 a year from her business, but typically has about $15,000 in tax-deductible variable business expenses (expenses that are only incurred if Marta works) annually. In addition to their earned incomes, the couple shares a total of $20,000 annually in investment income, which they report equally for income tax purposes. As well, Marta receives $5,000 a year (for the next 12 years) in trust income from a testamentary trust set up by her grandmother. The couple has contacted you to discuss their mutual need for disability insurance protection. 11. What sources of income would the insurance company take into consideration in determining the maximum amount of disability insurance coverage that they would issue on Johann? (A) Johann's gross salary only. (B) Johann's after-tax salary only. (C) Johann's gross salary and the $10,000 of investment income, only. (D) Johann's after-tax salary, the $20,000 of investment income and Marta's $5,000 of trust income only.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Tax Planning and Strategies
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
CONCEPTS IN FED.TAX., 2020-W/ACCESS
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:
9780357110362
Author:
Murphy
Publisher:
CENGAGE L
SWFT Comprehensive Volume 2019
SWFT Comprehensive Volume 2019
Accounting
ISBN:
9780357233306
Author:
Maloney
Publisher:
Cengage
SWFT Comprehensive Vol 2020
SWFT Comprehensive Vol 2020
Accounting
ISBN:
9780357391723
Author:
Maloney
Publisher:
Cengage
SWFT Essntl Tax Individ/Bus Entities 2020
SWFT Essntl Tax Individ/Bus Entities 2020
Accounting
ISBN:
9780357391266
Author:
Nellen
Publisher:
Cengage
SWFT Individual Income Taxes
SWFT Individual Income Taxes
Accounting
ISBN:
9780357391365
Author:
YOUNG
Publisher:
Cengage
SWFT Corp Partner Estates Trusts
SWFT Corp Partner Estates Trusts
Accounting
ISBN:
9780357161548
Author:
Raabe
Publisher:
Cengage