Question

Compute the taxable income for 2019 for Aiden on the basis of the following information. Aiden is married but has not seen or heard from his wife since 2017. Salary $80,000 Interest on bonds issued by the City of Boston 3,000 Interest on CD issued by Wells Fargo Bank 2,000 Cash dividend received on Chevron common stock 2,200 Life insurance proceeds paid on death of aunt (Aiden was the designated beneficiary of the policy) 200,000 Inheritance received upon death of aunt 100,000 Jackson (a cousin) repaid a loan Aiden made to him in 2009 (no interest was provided for) 5,000 Itemized deductions (state income tax, property taxes on residence, interest on home mortgage, and charitable contributions) 9,700 Number of dependents (children, ages 17 and 18, and mother-in-law, age 70) 3 Age 43

Answer 1

Computation of taxable income of Aiden
Income from salary	$80000
Interest on CD issued by Wells Fargo Bank	$2000
Cash dividend received on Chevron common stock	$2200
Life insurance proceeds paid due to the death of aunt Margie	NIL
Inheritance received on death of Aunt Margie Repayment of loan received	NIL
Gross Total Income	$84200
Less:Deductions	($9700)
Taxable Income	$7 4500

Life insurance proceeds received on the event of demise of the insured person is generally not taxable in the hands of the beneficiary. But if any interest is arising out therefrom this is a taxable income and hence to be reported accordingly.

Inheritance is also not taxable in the hands of the beneficiary and therefore not reported in the taxable income. However foreign inheritance is taxed if it is above the limit of $100000.

Generally loans given free of interest is taxed in certain situations. The rule for imputed interest applies in this case. But due to want of adequate information on these, taxable portion of imputed interest could not be calculated.    

Exemptions: The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.

Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state.