Reference no: EM131720067

Federal Income Taxes Midterm Exam - Show all components of your work for partial credit review.

Mike (age 40) and Carol (age 39) Brady are married. Carol works as a retail manager and Mike is a self-employed architect but does not maintain a home office. Their 2016 tax and other information are as follows:

Salary - Carol	80,000
Federal withholding on salary	15,000
State withholding on salary	5,000
Interest income on municipal bonds:
State of Connecticut	2,500
Savings account interest	1,000
Dividends from RGR, Inc. (all are non-qualified)	4,000
Value of employer provided medical insurance	3,000
Inheritance from Carol's father's estate	6,000
Interest paid on personal car loan	2,500
Interest paid on personal loan	1,000
Child support paid to Mike's ex-wife	12,000
Alimony paid to Mike's ex-wife	6,000
Qualified Out of Pocket Medical Expenses	4,000
Donations to church Real Estate taxes on primary residence	2,500 6,000
Mortgage interest on primary residence (<$1M)	4,000
Mike's business revenues	50,000
Mike's business expenses	15,000

Required: Using the tax formula format, determine the following for the Brady's 2016 tax year (show all calculations):

a. All Income $___________

b. Exclusions (if any) $ ___________

c. Gross income (including Mike's SE income) $ ___________

d. Deductions For AGI $ ___________

e. Adjusted gross income $ ___________

f. Itemized deduction or standard deduction amount $ ___________

g. Deduction for exemptions $ ___________

h. Taxable income $ ___________

i. Income tax liability $ ___________

j. Self-employment tax liability $ ___________

k. Net tax due or refund (show calculation) $ ___________