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 prepara

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
 
.
 
 
 
 
Expert Solution
Step 1

Taxable income refers to the sum value of money gained by an entity which is subject to a mandatory charge levied by the government.

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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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