Question
Ned and Nelda Norman, both age 39, have two children, Nick, age 16, and Nan, age 12. Ned is an elementary teacher and Nelda manages
Ned and Nelda Norman, both age 39, have two children, Nick, age 16, and Nan, age 12. Ned is an elementary teacher and Nelda manages a local office supply store. Ned's income, for federal income tax purposes, is $40,000 and Nelda's income, for federal income tax purposes, is $80,000. They earned $600 in interest and received a $600 state income tax refund. Ned and Nelda itemized deductions last year. Both Ned and Nelda are covered by qualified pension plans through their employers. Ned and Nelda had the following expenses during the year: Ned spent $500 on materials for his classroom. Ned and Nelda each contributed $5,000 to traditional IRAs. They had medical expenses of $9,500 none o which were reimbursed by insurance. They contributed $2,000 to their church. They paid $5,000 in state income taxes. They paid $6,000 in real estate taxes. They paid $10,000 in mortgage interest. They had a $5,000 casualty loss. They had $10,000 withheld for federal income taxes.
- What is their AGI? a) $110,950 b) $120,000 c) $121,200 d) $120,950
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