1. Using the IRS Form 1040, compute and report the amount of Adjusted Gross Income for Richard who graduated last year from Wofford and now works at Milliken. His salary for the year was $62,000. He earned interest of $150 from the City of Spartanburg water district bond, and $115 from Bank of America savings; invested in MSFT stock and received a dividend of $185. He set-up a Traditional IRA to which he contributed $1,500.

2. Focused strictly on the tax consequences, if you could receive $10,000 from either wages, gift from your grandparents, selling stock that was held more than one year, or gain from installment sale, which would you select and why? What would be your second choice and why?

3. Using the Income Tax Formula, present these numbers in the proper order and manner for a Single Taxpayer (note not all numbers may be used): Tax liability $4,500; Deductions for AGI $1,200; Gross Income $46,000; Deductions from AGI $10,200; Tax Credit $200, Taxes Withheld from wages $2,600; Standard Deduction $12,000.

4. Using the IRS Schedule A, complete the form based on the following information for a single individual taxpayer: Residential real estate taxes paid $4,850; mortgage interest paid of $7,350, State income taxes paid of $1,750; Cash contribution to church $1,100; Non-cash contribution of clothing valued at $200 to the Salvation Army; Sales tax of $850.

5. Explain the difference between a tax deduction and a tax credit. Would you rather have one than the other when computing your income taxes? If so, explain why.