Question

Fred's income this past year included salary of $70 000, $3 000 in interest income, a $4 000 capital gain from selling some stock and a $5000 inheritance. For tax purposes, what is his total income this year?

A) $80 000
B) $82 000
C) $75 000
D) $77 000

Answer 1

Fred's total taxable income, which includes his salary, interest income, and capital gain, amounts to $77,000 excluding the non-taxable inheritance.

Step-by-step explanation:

To calculate Fred's total income for tax purposes, we should include all taxable sources of income. His salary of $70,000 is taxable, as is the interest income of $3,000 and the capital gain of $4,000 from selling stock. The inheritance is generally not taxable for federal income tax purposes, so we should exclude the $5,000 inheritance from the total. Adding up the taxable income sources, we get a total of $77,000 ($70,000 + $3,000 + $4,000), which corresponds to option D in the question provided.