Billy owns an investment that yields a 10% rate of return each year. The returns from this investment are fully taxable for income tax purposes. If Billy is in a 25% tax bracket, what is his after-tax rate of return?Terri wants to buy a hot tub. The tub, including all sales taxes, will cost $7,000. Terri is in a 7% state tax bracket, a 25% federal income tax bracket, and also pays 7.65% payroll tax. How much money must Terri earn GROSS from her job in order to buy the hot tub?

• JoeandJaneSchmoaremarriedandhavetwodependentchildren.Theyhavethefollowingfinancialinformationduringthetaxyear:

Joes reported taxable salary received- $42,500

Janes reported taxable salary received- $16,000

Joe and Jane made contributions of $3,000 to their church.

Joe and Jane received $1,240 in interest income from a bank account.

Joe received $20,000 in a settlement of his late mothers estate.

Jane donated $1,000 to the National Liberation Party.

Joe and Jane paid $6,000 in mortgage interest.

Joe had $1,780 withheld in state income tax.

Jane had $500 withheld in state income tax.

Joe and Jane paid $1,100 in real estate property tax and $850 in personal property tax.

Joe paid $2,500 in alimony to his ex-wife.

Joe paid $6,300 child support to his ex-wife.

Joe received $800 insurance settlement for a car crash.

Jane received $112 in regular dividend income.

Joe and Jane are eligible for $1,200 per child, child tax credit.

If the Schmos file jointly, what (for tax purposes) is their:

Total income? AGI? Total itemized deductions?

• Taxableincome(assumetheyqualifyforrelevantexemptionsatthevaluelistedinyourtextbook)?
• JoeandJaneSixpackaremarriedandhavethreedependentchildren.Theyhavethefollowingfinancialinformationduringthetaxyear:

Joes reported taxable salary received= $38,500

Janes reported taxable salary received= $19,000

Joe and Jane made contributions of $5,500 to their church.

Joe and Jane received $240 in interest income from a bank account.

Joe paid $20,000 in qualified medical expenses.

Jane donated $1,000 to the Girl Scouts of America.

Joe and Jane paid $8,000 in monthly rents.

Joe had $780 withheld in state income taxes.

Jane had $250 withheld in state income taxes.

Joe and Jane paid $1,850 in personal property tax.

Jane received $2,000 in child support from her ex-husband.

Joe received $800 workers compensation insurance settlement.

Jane received a $10,000 from her mother.

Joe and Jane are eligible for $1,200 per child, child tax credit.

If the Sixpacks file jointly, what is their:

• Total income?
• AGI?
• Itemizeddeductions?

Answer items 5-12 using the following information. Assume the exemption amount is $2,500 per person, and the standard deduction is $6,000 (single) and $12,000 (MFJ).

Jeff Schmo was married until December 12, 2013, on which date he became divorced. He provides full support for his two children, ages 8 and 6 (even though they live with Jeffs ex-wife), so he claims them as dependents. Jeff had the following financial information in 2013:

Salary from job= $65,000Gifts to charity= $3,000Alimony to ex-wife= $12,000Interest received from bank accounts= $830Child support paid= $15,000Proceeds from sale of stock= $14,000. Shares were bought two years ago for $9,500Proceeds from sale of farmland= $350,000. Farmland was purchased by Jeffs father 20 years ago for $100,000. Five years ago, Jeff inherited the land which at the time had a fair market value= $250,000Proceeds from sale of artwork= $7,500. Artwork was received as a gift in 2011; donor basis was $5,000; FMV at gift date was $6,200Real estate taxes paid= $1,100Interest paid on home mortgage loan= $2,500Interest received on municipal bond portfolio= $1,750

• Jeffpaidoutofpocketmedicalexpenses=$3,500

What is Jeffs 2013 filing status?What is Jeffs 2013 Total Income?What is Jeffs 2013 Adjustments to Income? What is Jeffs 2013 AGI?Should Jeff itemize his deductions or take the standard deduction?If Jeff itemizes, what is his total of itemized deduction?What is the total of Jeffs exemptions?What is Jeffs taxable income?

• Of the capital gains income items, which will be taxed at a lower (preferred) rate?
• If an investor is in a 15% tax bracket, how much is a $350 itemized deduction worth? How would this compare to a $350 tax credit?