Mary Maloney is single; she is 36 years old and adopted two children 5 years ago Ben 8 and Rebecca 20. She works for a multi-national corporation headquartered in the United States which she spends a lot of time out of the country in Dubai, where she earned $29,000 and $40,200 in the United States. She had to pay $4,630 to Dubai in taxes and has a potential U.S. tax liability of $9,569. She had withholding's of $9,654. Because she needs help with Ben when she is not in the country she pays $2,700 in babysitters and $10,500 for 3^rd grade private school. She has invested well and receives $5,400 in dividends from domestic corporations and $7,400 in interest in municipal bonds. Rebecca is attending Pace University where she dorms and is studying accounting. Mary is very happy that she could send Rebecca to Pace and if it wasnt for the American Opportunity Credit she would not be able too. Because of this the phase outs concern her for this credit based on her income.

A. What is Marys taxable income and tax liability?

B. Please explain the American Opportunity Credit and phase-outs to Mary.