Answered: Qualified medical expenses $8,000…

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter3: Tax Formula And Tax Determination; An Overview Of property Transactions

Section: Chapter Questions

Problem 49P

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Question

During 2021, James, a single, cash-method taxpayer, had the following income items and expenditures:

James incurred the following expenditures:

Qualified medical expenses	$8,000
Investment interest expense	17,000
Other investment activity expenses	8,000
Qualified residence interest	12,500
Interest on loan on a personal auto	2,100
Charitable contributions	3,400
State income tax paid	7,100
State sales tax paid	4,700
Property taxes	3,800
Tax return preparation and consulting fees	5,900

James'

income consisted of the following items:

Salary	$63,000
Interest income	6,500
Long-term capital gains	19,000
Long-term capital losses	(11,000)

Compute James'taxable income for the year (assuming that he makes an election to have the net capital gain taxed at the regular tax rates).

Begin by calculating the adjusted gross income (AGI). (If an input field is not used in the table, leave the input field empty; do not select a label or enter a zero.)

Requirement a. Compute James'taxable income for the year (assuming that he makes an election to have the net capital gain taxed at the regular tax rates).

Salary	63,000
Interest income	6,500
Net long-term capital gain	8,000

Adjusted gross income (AGI)	77,500

Part 2

Now calculate the itemized deductions. (Complete all input fields. Enter a "0" for appropriate balances.)

Medical expenses	8,000
Less:	7.5% of AGI
Excess medical expenses




Total itemized deductions

Part 3

Compute James' taxable income for the year.


Minus:	Deductions from AGI:

Taxable income

Part 4

Requirement b. What is James' investment interest carryover (if any)?

James' investment interest carryover is

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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Follow-up Question

What about the tax return preparation?

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Follow-up Question

-Medical	8,000
Less: (8,000 * 0.075)	(6,375)	1,625

I thought you are to use 7.5% of AGI

Investment interest )(6,300+8,000-8,000)

Were did you get 6,300 from??

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