Reference no: EM133183174

Compute the TAXABLE INCOME for Walter and Margaret.

BACKGROUND:

Walter and Margaret need help computing their TAXABLE INCOME for the past year.  They have been married for 11 years.  Walter and Margaret live together and have no children.

ASSUMPTIONS:

• Walter's gross income from work (PRIOR to 401(k) contribution):  $59,000.00.
• Margaret's gross income from work (PRIOR to 401(k) contribution):  $44,000.00.
• Walter contributes 10% of his work paycheck to his 401(k).
• Margaret contributes 7% of her work paycheck to her 401(k).
• Together, Walter and Margaret give $1,500 to charity each year (their church).
• Their combined bank account earned $75.00 in interest in the last year.
• Walter and Margaret own a small condo which they rent to college students.  Last year they collected a net $11,000 in rent (after expenses).
• Walter has a traditional IRA.  Last year, he contributed $5,500 to his IRA.  Margaret does not have an IRA.
• Walter and Margaret have a mortgage on their primary residence.  Last year, they paid $8,955.00 in mortgage interest on their home.
• Margaret has a stock brokerage account.  During the last year, she bought 500 shares of CAG (ConAgra Foods) stock at $33.00 per share.  Two months later, CAG shares dropped to $26.00 per share and Margaret sold all 500 shares.  She then purchased 100 shares of FB (Facebook) stock at $124.00 per share.  Three months later (in December), she sold all 100 shares at $165.00 per share!
• Walter does not have a stock brokerage account.
• The Standard Deduction for a married couple filing a joint return was $24,000.00 last year.