Frederick Blackwood is a single licensed architect based in Scottsdale, Arizona, who earns a salary from a regional design firm while also operating a solo residential design consulting practice as a sole proprietor. He received interest income from a high-yield savings account, qualified dividends from a diversified stock portfolio, and realized a long-term capital gain from the sale of appreciated shares. He contributes $6,000 to a traditional IRA as an above-the-line deduction and itemizes deductions consisting primarily of mortgage interest on his Scottsdale home, state and local taxes (capped), and charitable contributions.
Correct Answers
A G I
$152,950.00
gross Income
$158,950.00
tax Liability
$23,536.00
taxable Income
$133,150.00
refund Or Due Amount
$8,426.00
refund Or Due Direction
Balance Due
Step-by-Step Solution
TAX FORMULA — Frederick Blackwood (SINGLE) GROSS INCOME Wages: $91,600.00 Interest Income: $6,850.00 Ordinary Dividends: $4,300.00 Business Income: $43,700.00 Capital Gain: $12,500.00 = Gross Income: $158,950.00 − Above-Line Deductions: $6,000.00 = AGI: $152,950.00 DEDUCTIONS Standard Deduction (single): $14,600.00 Itemized Deductions: $19,800.00 Deduction Used: $19,800.00 (itemized) = Taxable Income: $133,150.00 TAX CALCULATION Ordinary Taxable Income: $116,900.00 Ordinary Tax: $21,098.50 LTCG + Qualified Div: $16,250.00 LTCG Tax: $2,437.50 − Credits: $0.00 = Tax Liability: $23,536.00 − Taxes Withheld: $15,110.00 = Tax Due: $8,426.00