Reference no: EM131588730

1. P and J are a married couple with the following items of income for 2014:

P wages                   $45,000

State tax refunds      $5,000

J unemployment       $2,750

Dividends                 $400

Interest income        $350

J Social Security       $18,000

P is a flight attendant who occasionally takes advantage of the airline's "friends and family" benefits where P and J can fly for free on certain flights at certain times. The only restriction on the use of the flights by P and J is that the flight cannot be full, otherwise, they can fly anywhere in the world.  P and J took flights costing $4,000 during the year when compared to regular passenger costs. A review of their 2013 tax return shows they deducted $1,200 of state income taxes on their federal return.

P and J also have the following deductions:

Interest on home mortgage               $5,000

State income taxes                           $2,500

State sales taxes                              $1,000

Property taxes                                 $1,500

Charitable contributions                    $300

Contributions to congressman           $400

Airline uniform costs                        $300

Calculate P and J's 2014 Adjusted Gross Income (AGI) as well as their taxable income. Presume that their personal exemptions total $7,000 and they will file a married filing joint tax return. If you are excluding any of the above items from either income or deductions P and J are a married couple with the following items of income for 2014:

P wages                     $45,000

State tax refunds        $5,000

J unemployment         $2,750

Dividends                   $400

Interest income          $350

J Social Security         $18,000