Question

Mr. and Mrs. Sam Morris retired on February 10, 2023, and call you in for tax service. Both Sam and his wife Sarah have worked for many years. Sam is 65 years of age and his wife is 63. Facts: Dependent child: Age 21 Social security benefits 9,900 Salaries: Sam (January 1-February 10) 7,000 Sarah (January 1-February 10) 5,500 Interest income: Port authority of N.Y. bonds 300 Interest from bank deposits 11,100 Corporate bonds 900 Highway bonds of Ohio 100 Dividend income: Microsoft common stock 4000 General electric common stock 2000 AGA Ltd. Of England 1000 Net rental income 4000 a One of their tenants moved out on July 14, 2023, and Sam determines that they had damaged the stove, and therefore returned only $50 of their $150 security deposit. The Morrises’ daughter borrowed $10,000 two years ago to purchase a new automobile. She has made payments to her parents and on September 1, 2023, only $2,500 was still outstanding on the loan. On their daughter’s birthday, they told her she no longer had to make payments. Sam was Vice president of a very large corporation. As part of his fringe benefit package, the corporation purchased for him $50,000 of group-term life insurance. The corporation continued to pay for his life insurance even after retirement. The Morisses’ three children gave their parents a gala retirement party. Gifts valued at over $1000 were received by the couple. In October, Mrs. Morris entered a contest being run by a local bank. She submitted drawings for a bank logo. Her drawing was selected and she received $500. Many years ago, Sam purchased an annuity policy for $9000. Starting on March 3, 2023, he began receiving lifelong monthly payments of $60. The Morrises’ 21-year-old daughter is in college. She worked during the summer and earned $2,500. Interest on her savings accounts amounted to $500. Her parents paid for the college tuition of $4,000. The Morrises have itemized deductions of $26,000. determine the Morrises taxable income of 2023

Answer 1

The Morrises' taxable income for 2023 is $19,800.

Step-by-step explanation:

To determine the Morrises' taxable income for 2023, we need to calculate their total income and subtract their itemized deductions. Let's analyze each source of income:

• Salaries: Sam earned $7,000 and Sarah earned $5,500, so their total salary income is $12,500.
• Social security benefits: They received $9,900 in social security benefits.
• Interest income: They earned $300 from Port authority of N.Y. bonds, $11,100 from bank deposits, $900 from corporate bonds, and $100 from highway bonds of Ohio. So, their total interest income is $12,400.
• Dividend income: They received $4,000 from Microsoft common stock, $2,000 from General electric common stock, and $1,000 from AGA Ltd. Of England. Their total dividend income is $7,000.
• Net rental income: They earned $4,000 from rental income.

To calculate their total income, we add up all the sources of income:
Total Income = Salary income + Social security benefits + Interest income + Dividend income + Net rental income
Total Income = $12,500 + $9,900 + $12,400 + $7,000 + $4,000 = $45,800

Now, let's subtract their itemized deductions of $26,000 from their total income:
Taxable Income = Total Income - Itemized Deductions
Taxable Income = $45,800 - $26,000 = $19,800

Therefore, the Morrises' taxable income for 2023 is $19,800.