Problem 1-6

The Tax Formula for Individuals, Filing Status and Tax Computation (LO 1.3, 1.5, 1.6, 1.7)

Diego, age 28, married Dolores, age 27, in 2016. Their salaries for the year amounted to $47,230 and they had interest income of $3,500. Diego and Dolores' deductions for adjusted gross income amounted to $2,000; their itemized deductions were $11,800; they claimed two exemptions on their return; and, they filed a joint return.

Table for the standard deductionFiling Status2016 Standard DeductionSingle$ 6,300Married, filing jointly12,600Married, filing separately6,300Head of household9,300Qualifying widow(er)12,600Click here to access thetax tables.

a.What is the amount of their adjusted gross income?

$

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Individual taxpayers calculate their tax in accordance with a tax formula. Understanding the formula is important, since all tax determinations are based on the result.

b.In order to minimize taxable income, Diego and Dolores willtake the standard deductionin the amount of $.

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Correct

c.What is the amount of their taxable income?

$

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Incorrect

d.What is their tax liability for 2016?

Problem 1-9

The Tax Formula for Individuals, Filing Status and Tax Computation, Personal and Dependency Exemptions (LO 1.3, 1.5, 1.6, 1.7)

Jonathan is a 35-year-old single taxpayer with adjusted gross income of $46,300. He uses the standard deduction and has no dependents.

Table for the standard deductionFiling Status2016 Standard DeductionSingle$ 6,300Married, filing jointly12,600Married, filing separately6,300Head of household9,300Qualifying widow(er)12,600Click here to access thetax tables.

a.Calculate Jonathan's taxable income.

$

b.When you calculate Jonathan's tax liability are you required to use the tax tables or the tax rate schedule?

The tax table must be used unless the taxpayer's taxable income is $100,000 or more.

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Correct

c.What is Jonathan's tax liability?

$