Question
I need help solving the below question: Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2018 adjusted
I need help solving the below question:
Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2018 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income). They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. Sebastian and Kaitlin also paid the following amounts in 2018:
- $38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995. The principal amount of the mortgage is $1,250,000. They also paid $8,250 in real estate taxes on the home.
- $6,000 investment interest expense
- $7,600 unreimbursed employee business expenses (none for meal or entertainment expenses)
- $1,650 in state income taxes to the state of California where Sebastian worked for part of the year
- $1,400 in state and local general sales taxes
- $490 fee for preparation of their 2017 tax return, paid to their CPA in 2018
- $2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships. They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for it fair market value of $17,000 at its fundraising auction.
What is Sebastian and Kaitlin's taxable income for 2018 if they do not itemize their deductions and file as married filing jointly?
Select one:
a.$333,700
b.$366,000
c.$390,000
d.$377,300
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