Solution
Bhavani answered on
Jul 13 2021
AC309 Unit 5: Application Assignment –Investments
Millie is a single taxpayer and her 2018 taxable income is $181,205, calculated as follows:
Description
Amount
Employee wages
133,000
Profit from business (Schedule C)
15,000
Ordinary income from partnership (Schedule E)
22,000
Interest income
4,000
Ordinary dividends (total dividends = 9,000)
2,000
Qualified dividends (total dividends = 9,000)
7,000
Short-term capital gain
8,200
Long-term capital gain
6,900
Total Income – Form 1040, Line 6
198,100
Deduction for ½ of self-employment tax
(495)
Adjusted Gross Income – Form 1040, Line 7
197,605
Standard deduction – Form 1040, Line 8
(12,000)
Qualified business income deduction – Form 1040, Line 9
(4,400)
Taxable Income – Form 1040, Line 10
181,205
Ordinary Income Bracket
Tax Calculation
$0 - $9,525
10% of ordinary income
$9,526 - $38,700
$952.50 plus 12% of ordinary income over $9,525
$38,701 - $82,500
$4,453.50 plus 22% of ordinary income over $38,700
$82,501 - $157,500
$14,089.50 plus 24% of ordinary income over $82,500
$157,501 - $200,000
$32,089.50 plus 32% of ordinary income over $157,500
$200,001 - $500,000
$45,689.50 plus 35% of ordinary income over $200,000
$500,001 or more
$150,689.50 plus 37% of ordinary income over $500,000
Instructions
(1) Separate Millie’s 2018 taxable income of $181,205 into its ordinary income and preferential income components. Hint – your...