Fill in the blanks below regarding the 2019 tax liability for Jim and Sue (due April 15^th, 2020), a married couple with two young children. Jim earned $65,000 in salary as a government worker, and Sue earned $95,000 in commissions as a stockbroker. Sue also made a net profit in 2019 of $4,000 from day trading (i.e., buying and selling a stock over a short period of time). They also received an inheritance in of $25,000 in March of 2019 when Jims great aunt died. On December 30^th of 2019, they sold 200 shares of Beta Zerc Corp. stock for $30.00 per share that they had bought in May of that year for $20.00 per share. The stock paid them a total of $1 per share in dividends during 2020 (ignore transactions costs, such as brokerage commissions for the test but, FYI, they are tax deductible). Jim bought a 1962 Corvette in February of 2018 for $55,000 and sold it in October of 2019 for $63,000. Both Jim and Sue made (traditional) IRA contributions of $5,500 each. (FYI, the individual maximum for 2019 is $6,000)

For 2018 taxes, the IRS allows tax payers an exemption of $4,000 per qualified individual. The standard deduction for 2019 is $24,000 for a married couple filing jointly (as in this case). The tax rate on long term capital gains and dividends is 20%. Jim and Sues expenses that qualified as deductions were $11,500 for property taxes paid during the year, and $5,800 in mortgage interest. Sue also had $3,500 in qualified job related expenses.¹ They also donated a total of $2,000 to qualified charities. The marginal tax rates for a married couple filing jointly are listed below.

1) In reality, the tax code, as revised in 2017, eliminates tax deductions for job related. But assume they still exist for the purposed of this problem.

Taxable Income Tax Rate

$0 - 10,000 10%

More than $10,000 -- $30,000 15%

More than $30,000 -- $70,000 20%

More than $70,000 120,000 25%

More than $120,000 30%

1) What is their income from all sources?______________

2) Refer to Jim and Sue's financial information. For tax purposes, what are their total Exclusions and Adjustments? $____________

3)What was their Adjusted Gross Income? AGI = $_____________

4)What was their total income that was subject to special rates (i.e., not the marginal tax rates on tax schedule)? Total = $___________

5)What is the total value of their exemption? Exemptions = $_____________

6)What is the total value of their deductions that they will use for tax purposes? Value of Deductions = $__________

7)What is their tax liability on income subject to the marginal tax rates? (be sure to net out adjustments, exemptions and deductions before computing tax liability.) Tax liability on ordinary income = $______

8)What is their total tax liability on income subject to special rates? Tax liability = $__________