Through November, Tex has received gross income of $52,500. For December, Tex is considering whether to...

Through November, Tex has received gross income of $52,500. For December, Tex is considering whether to accept one more work engagement for the year. Engagement 1 will generate $7,450 of revenue at a cost of $3,550, which is deductible for AGI. In contrast, engagement 2 will generate $7,450 of revenue at a cost of $3,900, which is deductible as an itemized deduction. Tex files as a single taxpayer. a. Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions other than those generated by engagement 2.

b. Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $5,260 of itemized deductions other than those generated by engagement 2.

c. Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $10,400 of itemized deductions other than those generated by engagement 2.

Solutions

Expert Solution

Answer:b

Description	Engagement 1	Engagement 2	Computation
(1) Gross income before new work engagement	52500	52500
(2) Income from engagement	7450	7450
(3) Additional for AGI deduction	-3550	0
(4) Adjusted gross income	56400	59950	(1)+(2)+(3)
(5) Greater of itemized deductions or standard deduction of $6,300	-6300	-9160	$(3,900+$5260) itemized deductions for Engagement 2
(6) Personal exemption	-4000	-4000
Taxable income	46100	46790	(4)+(5)+(6)

Answer:c

Description	Engagement 1	Engagement 2	Computation
(1) Gross income before new work engagement	52500	52500
(2) Income from engagement	7450	7450
(3) Additional for AGI deduction	-3550	0
(4) Adjusted gross income	56400	59950	(1)+(2)+(3)
(5) Greater of itemized deductions or standard deduction of $6,300	-10400	-14300	$(3,900+$10400) itemized deductions for Engagement 2
(6) Personal exemption	-4000	-4000
Taxable income	42000	41650	(4)+(5)+(6)

ekkarill92 answered 1 year ago

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