1. Income Tax Fundamentals 2009 edition Gerald E. Whittenburg Martha Altus-Buller 2009 Cengage Learning

12. Gross income $40,000 Adjusted gross income 37,500 Greater of the standard deduction or itemized deductions ___________ Taxable income ___________ AGI = $40,000 – 2,500

13. Gross income $40,000 Adjusted gross income 37,500 Greater of the standard deduction or itemized deductions 5,450 Taxable income ___________ The standard deduction of $5450 exceeds itemized deductions of $3000 2009 Cengage Learning

14. Gross income $40,000 Adjusted gross income 37,500 Greater of the standard deduction or itemized deductions 5,450 Taxable income $28,550 Taxable income = $37,500 – 5,450 – 3,500 exemption 2009 Cengage Learning

31. The special rule for standard deduction for dependents is “deduction = greater of $900 or earned income + $300 but only up to basic standard deduction” Example 1: Jaime is 23 and a full time student and her folks claim her as a dependent; she earned $2,000 in 2008. 2,000 earned income ( 2,000 ) standard deduction $0 taxable income Example 2: Tia is 18 and has dividend income of $1,500 [not earned] 1,500 dividend income ( 900 ) standard deduction $ 600 taxable income

32. Basic Gain/Loss Model Amount Realized* - Adjusted Basis** Realized Gain/Loss *Sales Price - Sales Expenses **Cost - Accumulated Depreciation

35. Facts: Noah purchased Sony AAA bonds in 2001 for $47,600. In 2008, he sold the bonds for $51,500, paying commission of $515. What is his: Amount realized ___________ Adjusted basis ___________ Realized gain/loss ___________ Recognized gain/loss ___________ Type of gain/loss ___________

36. Amount realized * $50,985 Adjusted basis 47,600 Realized gain/loss 3,385 Recognized gain/loss 3,385 Type of gain/loss Long term capital gain *$51,500 – 515 = 50,985