Question

Problem 1

Fareh is not married and supports her 12 year old child who lives with her. Fareh works as an employee with gross salaries and wages of $122,000. Fareh’s only other income was interest of $7,300, qualifying dividends of $3,150, and other information follows:

Contribution to solo(k) retirement plan, withheld from the salary $ 4,500

Loss on sale of Alphatech stock held 2 years -3,700

Mortgage interest on primary residence 4,950

State and local property tax on residence 3,350

Property tax included in personal auto registration 160

State sales taxes paid 370

State income taxes paid 1,800

Charitable contributions of cash 1,750

Political contributions 550

All information is for 2020.

Calculate Fareh’s adjusted gross income, taxable income, and gross tax. Show your work!

Problem 2

Jose has adjusted gross income of $110,000 from all sources except the following:

Net income from a limited interest in Aztec Partnership -$2,000

Net loss from a rent house -$22,000

Includable interest income 5,000

How much is Jose’s adjusted gross income? Show your work.

Problem 3

Henry, a single taxpayer with a marginal tax rate of 35 percent (taxable income is $300,000 before considering any of the items below), sold the following assets during the year:

Asset Sale Price Tax Basis Gain/Loss Holding Period

ABC Stock $ 50,000 $ 25,000 $ 25,000 More than One Year

XYZ Stock $ 12,000 $ 9,000 $ 3,000 Less than One Year

Stamp Collection $ 10,000 $ 5,000 $ 5,000 More than One Year

RST Stock $ 13,000 $ 19,000 $ (6,000) Less than One Year

Rental Home $ 100,000 $ 50,000* $ 50,000 More than One Year

*$25,000 of the gain is a 25 percent gain. The remaining gain is 0/15/20 percent gain.

What tax rate(s) will apply to each of Henry's capital gains or losses?

Answer 1

Problem - 1 :

problem -2 :

problem -3 :