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Daniel, age 38, is single and has the following income and expenses in 2018: Salary income...

Daniel, age 38, is single and has the following income and expenses in 2018:

Salary income $60,000

Net rent income 6,000

Dividend income 3,500

Payment of alimony in accordance with the separation agreement which was signed in 2018 12,000

Mortgage interest on residence 9,900

Property tax on residence 1,200

Contribution to traditional IRA (assume the amount is fully deductible) 5,000

Contribution to United Church 2,100

Loss on the sale of real estate (held for investment) 2,000

Medical expenses 3,250

State income tax 300

Federal income tax 7,000

1) What is Daniel's gross income?

2) What is Daniel's AGI?

3) What is Daniel's Total itemized deductions (after any limitations)? This is all for 2018.

If you could can you please explain how you got to the correct answer?

Thanks, I appreciate it much!

Solutions

Expert Solution

a. Compute gross income as follows
Particulars Amount Amount
       Salary $60,000
       Net income $6,000
       Dividend income $3,500
             Gross income $69,500
b Compute adjusted gross income as follows
Gross income $69,500
Less: Alimony paid $12,000
Less: IRA contribution $5,000
Less: Loss on the sale of real estate $2,000 $19,000
             Adjusted gross income $50,500
c Determine the amount of total deductions as follows
Itemized deductions:
   Mortgage interest $9,900
   Property tax $1,200
   Charitable contributions $2,100
   State income tax $300
   Medical expenses $3,250
   Less: 7.5% of AGI $3,788 $0
Total amount of itemized deductions $13,500

ekkarill92 answered 2 years ago
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