Instructions : Please provide 2-3 sentence brief explanation and choose the best
ID: 2564270 • Letter: I
Question
Instructions : Please provide 2-3 sentence brief explanation and choose the best multiple choice answer. All sources must be noted. SHOW ALL WORK.
PART A
____ 14. Jan is single, had gross income of $38,000, and incurred the following expenses:
Charitable contribution
$4,500
Taxes and interest on home
11,000
Legal fees incurred in a tax dispute
2,000
Short Term Capital loss
5,000
Penalty on early withdrawal of savings
600
Her AGI is:
a.
$23,400.
b.
$32,500.
c.
$32,400.
d.
$34,400.
e.
$20,000.
PART B
____ 15. Slim, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law. During 2016, a bill designated H.R. 10 is introduced into the state legislature which, if enacted, would legitimize bingo games. In 2016, Salim had the following expenses:
Operating expenses in conducting bingo games
$153,000
Payoff money to state and local police
40,000
Newspaper ads supporting H.R. 9
4,000
Political contributions to legislators who support H.R. 9
8,000
Of these expenditures, Sam may deduct:
a.
$52,000.
b.
$195,000.
c.
$153,000.
d.
$183,000.
e.
None of the above.
PART B
Charitable contribution
$4,500
Taxes and interest on home
11,000
Legal fees incurred in a tax dispute
2,000
Short Term Capital loss
5,000
Penalty on early withdrawal of savings
600
Explanation / Answer
SOLUTION
14. Jan's AGI is- $32,400.
Calculation of AGI-
Amount ($) Gross income 38,000 Deductions for AGI: Penalty on early withdrawal of savings (600) Short term capital loss (5,000) AGI 32,400