Harry and Matilda are married and have the following tax return data for 2011:

Do Harry and Matilda owe any income tax for 2011? Explain why they might owe tax in 2011, and discuss the items on their tax return that could cause them to pay income tax in 2011. Be sure to adequately explain each item. Calculations are notrequired.

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Income: Salaries Cash dividends Tax-exempt bond interest $100,000 4,000 8,000 112,000 Total income Exclusions Tax-exempt bond interest (8,000) $104,000 Gross income Deductions for adjusted gross income Loss on rental property Net operating loss carryforward $14,000 50,000 (64,000) 40,000 Adjusted gross income Deductions from adjusted gross income (after limitations): Medical expenses Taxes Home mortgage interest Home equity loan interest Charitable contributions Miscellaneous itemized deductions 3,000 14,500 15,200 9,000 6,200 3,500 (51,400) (14,800) Personal and dependency exemptions Taxable income