Question

Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received $273,000 of gross income.

1. Expenses associated with Jeremy’s store include $44,500 in salary (and employment taxes) to employees, $50,400 of supplies, and $19,800 in rent and other administrative expenses.
2. As a salesperson, Alyssa incurred $2,180 in travel expenses related to her employment that were not reimbursed by her employer.
3. The Johnsons own a piece of raw land held as an investment. They paid $680 of real property taxes on the property and they incurred $290 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.
4. The Johnsons own a rental home. They incurred $8,680 of expenses associated with the property.
5. Jeremy paid $4,680 for health insurance coverage for himself (not through an exchange). Alyssa was covered by health plans provided by her employer, but Jeremy is not eligible for the plan until next year.
6. Jeremy paid $2,680 in self-employment taxes ($1,340 represents the employer portion of the self-employment taxes).
7. Jeremy paid $5,360 in alimony and $3,270 in child support from his prior marriage (divorced in 2010).
8. The Johnsons donated $2,180 to their favorite charity.

Determine the Johnson's AGI given the above information:

Answer 1

Particulars	Amount	Explanation
Gross income	273000
1) Ordinary and necessary business expenses	114700	Ordinary expenses associated with Jeremy’s busines (44500+50400+19800)
2) Unreimbursed	-	Unreimbursed employee business expenses are deductible from AGI not for AGI
employment expenses
3) Real property taxes and investment	-	Taxes and investment expenses are deductible from AGI not for AGI
expenses.
4) Rental expenses	8680	Rental expenses are deductible for AGI even though they are technically investment or
		“production of income expenses.”
5) Self-employed	4680	Jeremy may deduct all the costs of his health insurance because he is not eligible for ST’s health plan
6) Self- employment	1340	½ of self-employment taxes allowed as for AGI deduction
taxes
7) Alimony	5360	Alimony is allowed for AGI deductions
8) Donations	-	Charitable contributions are from not for AGI deductions
Total for AGI	134760
deductions
Jhonson's AGI	138240