Question

• Phil, 35 years old is an accountant. He receives medical insurance and fringe benefits from the employee. His wife, Sharon is 33 years old and works part time as office manager. They have 1 child, Amy 4 years old (qualifies for the $2,000 child care credit. They live in NYC and Sharon’s mother cares for Amy at no cost.  

Phil’s Gross salary	$56,400
Sharon’s salary	$22,000
Cash gift	$5,000
Interest Income from bank acc	$100
Federal income tax w/h	$2,500
State income tax	$3,680
Charitable contributions	$6,000
Rent paid	$10,000
Made a loan on March 1 in current year to a friend, who was starting a business. Principal amount was $10,000 and interest is due on December 31 annually. Interest rate is 5%.	Calculate amount	(Loan was done as part of arm’s length transaction and interest was paid on time)
Purchased 100 shares of IBM for $2,000 in April of this year and sold the stock for December for $1,500	Calculate amount
Municipal Bond Interest	$500
Purchased 100 shares of Disney for $5,000 and sold it for $1,000. Held the stock for 2 years	Calculate amount

Calculate Phil and Sharon's taxable income?

Answer 1

Lets first calculate the missing amounts:

Made a loan on March 1 in current year to a friend, who was starting a business. Principal amount was $10,000 and interest is due on December 31 annually. Interest rate is 5%, amount = $500

Purchased 100 shares of IBM for $2,000 in April of this year and sold the stock for December for $1,500, Amount = $500

Purchased 100 shares of Disney for $5,000 and sold it for $1,000. Held the stock for 2 years, Amount = $4000

Net Salary is sum of both Phil's and Sharon's salary = $56400 + $22000 = $78400

Deductions of an amoun of $16050, results in net income = $78400 - $16050 = $62350

Further additions of pay from other sources which includes;

Interest income from bank = $100

Cash gift = $5000

Credit amount = $417

Muncipal Interest bond = $500

so, Total = $100+$5000+$417+$500 = $6017

Final salary after all deduction = $62350 + $6017 = $68367

Loan interest (loan made to a friend) = $500

Charitable contribution = $6000

So, taxable income = $68367 - $500 - 6000 = $61867