Case 4 A New Family Calculates Income and Tax Liability Kate Beckett and her two children, Austin and Alexandra, moved into the home of her new husband, Richard Castle, in New York City. Kate is a novelist, and her hus- band is a police detective. The family income consists of the following: $60,000 from Kates book royalties; $90,000 from Richards salary; $10,000 in life insurance proceeds from a deceased aunt; $140 in interest from savings; $4,380 in alimony from Kates ex-husband; $14,200 in child support from her ex-husband; $500 cash as a Christmas gift from Richards parents; and a $1,600 tuition-and-books scholarship Kate received to go to college part time last year. (a) What is the total of their reportable gross income? (b) After Richard put $5,600 into qualified retirement plan accounts last year, what is their adjusted gross income? (c) How many exemptions can the family claim, and how much is the total value allowed the household? (d) How much is the allowable standard deduction for the household? (e) Their itemized deductions are $13,100, so should they itemize or take the standard deduction? (f) What is their taxable income for a joint return? (g) What is their final federal income tax liability, and what is their marginal tax rate? (Hint: Use Table 4-2.) (h) If Richards employer withheld $25,000 for income taxes, does the couple owe money to the government or do they get a refund? How much?