Question

James received $25,000 of compensation from his employer and he received $1,900 of interest from a municipal bond. What is the amount of James's gross income?

Answer 1

James's gross income would include both the $25,000 compensation from his employer and the $1,900 municipal bond interest, totaling $26,900 before any deductions or considerations for tax-exempt status.

Step-by-step explanation:

James's gross income includes all the money he receives before any deductions or taxes. According to the information provided, he received $25,000 as compensation from his employer. Additionally, he received $1,900 as interest from a municipal bond. Generally, interest income from municipal bonds is not subject to federal income taxes and, in many cases, also exempt from state and local taxes. However, for the calculation of gross income, all income is usually included before tax-exempt status is considered.

Therefore, to calculate James's gross income, you would normally add both sources of income together:

So, James's gross income would be the sum of these two amounts, which is:

$25,000 (compensation) + $1,900 (municipal bond interest) = $26,900 gross income.