Question 27

Answer questions 26-33 on the basis of the following hypothetical information.

Fill in the blanks below regarding the 2022 tax liability for Reggie and Rachael (due April 17^th, 2023), a married couple with two young children. Reggie earned a salary of $65,000 as a manager at a clothing store, and Rachael earned $95,000 in wages and commissions as a stockbroker. Rachael also made a net profit in 2022 of $4,000 in 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 2022 when Reggies great aunt died. On December 30^th of 2022, 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 2022 (ignore transactions costs, such as brokerage fees, for this test but, FYI, they are tax deductible). Reggie bought a five-acre parcel of land in February of 2021 for $55,000 and sold it in October of 2022 for $63,000. Both Reggie and Rachael maximized their 2022 (traditional) IRA contributions of $6,000 each. Rachael also maxed out her traditional 401(k) contribution of $20,500, but Reggie did not contribute to his 401(k) plan. He felt that they needed the current income.

The standard deduction for 2022 is $25,900 for a married couple filing jointly (as in this case). The child tax credit is $2,000 per child. The tax rate on long term capital gains and dividends is 20%. Reggie and Rachaels expenses that qualified as deductions were $9,500 for property taxes paid during the year, and $12,800 in mortgage interest. Sue also . They also donated a total of $2,700 to qualified charities. The marginal tax rates for a married couple filing jointly are listed below.

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%

What is their Gross Income?

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Question 28

What was the amount of their exclusions?

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Question 29

What was the amount of their adjustments?

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Question 30

What was their AGI?

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Question 31

What was the amount of their deductions?

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Question 32

What was their taxable income?

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Question 33

What was their ordinary income?

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