Question

In: Accounting

1.Pat is 40, is single, and has no dependents. She received a salary of $390,000 in...

1.Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2018. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2015) of $40,000. The dividends are not qualified dividends. The following additional information is relevant.

Medical expenses (before 7.5%-of-AGI floor) $12,000
State income taxes 8,100
Real estate taxes 4,000
Mortgage interest on residence 13,100
Investment interest expense 3,800
Gambling losses 5,100

a. Compute Pat's taxable income and AMTI.

Taxable Income Computation
Adjusted gross income $
Itemized deductions
Taxable income $
AMTI Computation
Taxable income $
Add: itemized deductions adjustments
Add: income tax preference items
AMTI $

Feedback

The purpose of the AMT formula is to reconcile taxable income to AMTI. The reconciliation of taxable income to AMTI is accomplished by entering reconciling items to account for differences between regular income tax provisions and AMT provisions. These reconciling items are referred to as AMT adjustments or tax preferences.

b. Compute Pat's tentative minimum tax.

If required, round amounts to the nearest dollar.

Computation of AMT Base and Tax
AMTI $
AMT exemption
AMT base $
Tentative AMT $

Solutions

Expert Solution

Part 1

Taxable income computation

Salary

$390,000

Interest income

11,000

Dividend income

15,000

Gambling income

14,000

Adjusted gross income

430000

Itemized deductions:

Medical expenses ($12,000 – (7.5%*430000))

0

State income taxes

8,100

Real estate taxes

4,000

Mortgage interest on residence

13,100

Investment interest expense

3,800

Gambling losses

5,100

Total itemized deductions

34100

Taxable income

395900

Tentative minimum tax computation

Taxable income

395900

Plus adjustments:

Medical expenses

0

State income taxes

8,100

Real estate taxes

4,000

Subtotal

408000

Plus: Preference (interest on private activity bonds)

40,000

Alternative minimum taxable income (AMTI)

448000

Exemption [$70300 – 25%($448000-191500)]

(6175)

AMT base

441825

AMT rate

28%

Tentative AMT

123711


Related Solutions

Pat is 40, is single, and has no dependents. She received a salary of $390,000 in...
Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2018. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2015) of $40,000. The dividends are not qualified dividends. The following additional information is relevant. Medical expenses (before 7.5%-of-AGI floor) $12,000 State income taxes 8,100 Real estate taxes 4,000 Mortgage interest on residence 13,100 Investment interest expense 3,800 Gambling losses...
A) Maria is single with no dependents and has an annual salary of $125,000. She is...
A) Maria is single with no dependents and has an annual salary of $125,000. She is considering the purchase of a $400,000 house. While she was house-hunting, the 2017 tax act passed, changing the deductions and tax brackets and limiting the deduction for state and local taxes (SALT) to $10,000. Prior to 2018, the standard deduction for a single person was $6,350 and a person exemption of $4,050. A portion of the taxable income-brackets was: Over But Not Over Percentage...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Jane’s Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2021 Oakcrest Road, Boca Raton, FL 33431. Jane's Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal...
Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2021 Oakcrest Road, Boca Raton, FL 33431. Jane's Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential...
Linda received $90,000 in salary income for 2018. She has no dependents. Determine her income tax...
Linda received $90,000 in salary income for 2018. She has no dependents. Determine her income tax liability under each of the following independent situations: a. She files as a single individual. b. She is married and files a joint return with her spouse. Their only income is her $90,000 salary. c. She is married but files a separate
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In...
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2015, Janice opened her own office located at 2751 Waldham road, Pleasat Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6789. Janice's parents continue to provide health insurance for her under their policy. Janice wants to contribute to the Presidential Election...
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In...
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2019, Janice opened her own office located at 2751 Waldham road, Pleasat Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6789. Janice's parents continue to provide health insurance for her under their policy. Janice wants to contribute to the Presidential Election...
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In...
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2018, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6789. Janice’s parents continue to provide health insurance for her under their policy. Janice wants to contribute to the Presidential Election...
Joan, a single mother of 1 child, has a 2017 salary of $128,000. Gross Salary 128,000.00...
Joan, a single mother of 1 child, has a 2017 salary of $128,000. Gross Salary 128,000.00 Social Security ??? Medicare ??? Federal Income Tax 7,800.00 State Income Tax 5,400.00 401K 3,500.00 Union Dues 600.00 Charity 2,500.00 Note: 2017 Social Security Rate: 6.20% 2017 Medicare Rate: 1.45% 2017 Social Security Threshold: $127,200 Please prepare the Journal Entry to record Joan's payroll entries in the company's books.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT