Reference no: EM132220971

Question - Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $115,000, qualified business income of $11,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $207,500 and they sold it for $257,500. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,800 of itemized deductions, and they had $3,700 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. Please show all work. (CURRENT TAX YEAR)

a. What would their taxable income be if their itemized deductions totaled $28,300 instead of $16,800?

b. What would their taxable income be if they had $0 itemized deductions and $6,600 of for AGI deductions?

c. Assume the original facts but now suppose the Jacksons also incurred a loss of $5,150 on the sale of some of their investment assets. What effect does the $5,150 loss have on their taxable income?

d. Assume the original facts but now suppose the Jacksons own investments that appreciated by $10,000 during the year. The Jacksons believe the investments will continue to appreciate, so they did not sell the investments during this year. What is the Jacksons taxable income?