Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 3, Problem 6FPE

a.

Summary Introduction

To determine: The tax return of person L for the year 2018.

A taxable income is termed to any person's or business' remuneration that is utilized to decide tax liability. The gross income or total income is utilized as the origin to ascertain the amount of taxes an individual or a business owes to the government for the regular tax period.

a.

Expert Solution
Check Mark

Explanation of Solution

Determine the taxable income:

Form 1040 is used by majority of the taxpayers. Scholarship used to pay Tuition is tax exempted. The itemized deduction are lower than the standard deduction and will not influence the return.

Taxable=[AdjustedGrossIncomeStandardDeduction]=[($1,850+$55,000+$185)$12,000]=$45,035

Therefore the taxable income is $45,035.

Determine the tax liability:

TaxLiability=[AdditionalAmount+(TaxableIncomeTaxDue)×ApplicableTaxRate]=[$4,453.50+($45,035$38,700)×22%]=[$4,453.50+$1,393.70]=$5,847.20

Therefore the taxable liability is $5,847.20.

Determine the tax due:

TaxDue=[TaxLiabilityIncomeTaxesWithheld]=[$6,045.20+$2,600]=$3,247.20

Therefore the taxable due is $3,247.20.

b.

Summary Introduction

To determine: The tax return of person L for the year 2018 with additional information provided.

b.

Expert Solution
Check Mark

Explanation of Solution

Determine the revised adjusted gross income:

RevisedAdjustedGrossIncome=[GrossIncomePartA+CashDividendsIRAcontribution]=[$57,035+$150$5,000]=$52,185

Therefore the revised adjusted gross income is $52,185.

Determine the revised taxable income:

RevisedTaxableIncome=[RevisedAdjustedGrossIncomeStandardDeductions]=[$52,185$12,000]=$40,185

Therefore the revised taxable income is $40,185.

Determine the ordinary taxable income:

OrdinaryTaxableIncome=[RevisedTaxableIncomeCashDividends]=[$40,185$150]=$40,035

Therefore the ordinary taxable income is $40,035.

Determine the taxes on ordinary taxable income

TaxesonOrdinaryTaxableIncome=[AdditionalAmount+(TaxableIncomeTaxDue)×ApplicableTaxRate]=[$4,453.50+($40,035$38,700)×22%]=[$4,453.50+$293.70]=$4,747.20

Therefore the taxes on ordinary taxable income is $4,747.20.

Determine the tax liability:

TaxLiability=[TaxesonOrdinaryTaxableIncome+TaxesonDividends]=[$4,747.20+($150×15%)]=$4,769.70

Therefore the taxable liability is $4,769.70.

Determine the tax due

TaxDue=[TaxLiabilityIncomeTaxesWithheld]=[$4,769.70+$2,600]=$2,169.70

Therefore the taxable due is $2,169.70.

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