Through November, Tex has received gross income of $120,000. For December, Tex is considering whether to accept one more work engagement for the year.

Engagement 1 will generate $7,000 of revenue at a cost of $4,000 which is deductible for AGI. In contrast, engagement 2 will generate $7,000 of revenue at a cost of $3,000, which is deductible as an itemized deduction. Tex files as a single taxpayer.

a) Calculate Tex’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions other than those generated by engagement 2.

b) Calculate Tex’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $4,500 of itemized deductions other than those generated by engagement 2.

c) Calculate Tex’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $7,000 of itemized deductions other than those generated by engagement 2.