Question

The following information applies to Zachary, who is single, for 2020:

Salary $73,200 Alimony paid to his ex-wife (decree executed prior to January 1, 2019) 12,200 Child support payments 9,000 Cash prize from lottery 10,000 Capital gain from sale of personal sail boat 6,000 Appreciation in value of land purchased for investment 25,000 Capital loss from sale of corporate stock (2,000) Number of potential dependents ? Age 51

Zachary maintains a household for his uncle, who lives in another state. His uncle earned $23,000.

Click here to access the standard deduction table to use.

Indicate whether the following items are taxable or nontaxable to Zachary.

Capital gain from sale of personal sail boat Taxable Cash prize from lottery Taxable Salary Taxable Appreciation in value of land purchased for investment Not taxable

Identify whether the items are deductible (fully or partially) by Zachary.

Alimony paid to his ex-wife Deductible Child support payments Not deductible Capital loss from sale of corporate stock Deductible

Zachary's taxable income in 2020 is $.

Answer 1

Type                      Description                                                        Amount ($)                         Taxability/Deductibility

Income                 Salary                                                                  73,200                                            Taxable

Income                 Cash Prize from Lottery                                     10,000                                           Taxable

Income                 Capital Gain from sale of personal sail Boat         6,000                                             Taxable

Income                 Appreciation in value of land                               25,000                                            Non-Taxable                                      (Purchased for investment)

Expense               Alimony Paid to his Wife                                      12,200                                            Deductible

Expense               Child Support Payments                                        9,000                                            Non-Deductible

Expense               Capital Loss on corporate stock                              2,000                                            Deductible

Secondly, maintaining household of uncle is irrelevant for the question.

Now to Calculate taxable income, we must include all Gross Taxable Income (A) and reduce deductible Expenses (B).

And we know from above taxable incomes are:

             Income                                                                Amount ($)

Salary                                                                      73,200

Cash Prize from Lottery                                       10,000

              Capital Gain from sale of personal sail Boat            6,000

Total (A)                                                              $ 89,200

And here are deductible expenditure:

             Expense                                                               Amount ($)

Alimony Paid to his Wife                                    12,200

             Capital Loss on corporate stock                          2,000

Total (B)                                                               $ 14,200

Assumptions: It is assumed standard deduction is NIL in absence of table as mentioned in question.

Hence Net taxable income will be Gross taxable income (A) less Deductible Expenses (B)

= $ 89200 – $ 14200

= $ 75,000

So final taxable income of Mr. Zachary will be $ 75,000.

I hope it is useful to u if u have any doubt plz comment and plz give me up thumb