Mr. Smith is an attorney and Mrs. Smith is an insurance broker. They are married filing jointly. Total income reported on Form 1040 for the tax year 2020 is $140,000, and the standard deduction is $24,800.

Based on the scenario, complete the following:

1. Calculate Mr. and Mrs. Smith's taxable income by entering the adjustments from the case study below.
2. Start with gross income minus adjustments to arrive at adjusted gross income and then subtract itemized deductions.
3. Determine if they should take the standard deduction or itemize deductions to arrive at taxable income.
4. Explain why you chose to either itemize or take the standard deduction for each. Support your answers with evidence and cite your sources using an APA reference and citation.

Adjustments

1. Mr. Smith's federal withholdings of $10,000

2. Mr. Smith's state withholdings of $7,000

3. Mrs. Smith's federal withholdings of $17,000

4. Mrs. Smith's state withholdings of $6,000

5. Real estate taxes paid on home of $4,000

6. Cash Contributions to church of $12,000

7. Clothing donations to charity that cost $3,000 but have a thrift shop value of $300

8. Contributions to homeless woman totaling $200

9. Unreimbursed medical expenses of $4,000

10. Home mortgage interest of $12,000

11. Interest paid on car loan $3,000

12. Student loan interest $1,500

13. Alimony paid to Mr. Smith's ex-wife for divorce agreement finalized in 2015) totaling $15,000

14. Tax preparation fees $1,000

15. Cost to replace roof on personal residence for normal wear and tear $20,000

16. Unreimbursed cost for Mr. Smith to attend continuing education conference totaling $3,500

Answer rating: 100% (QA)

Answer A Computation of Mr and Mrs Smiths taxable income Particulars Amount in Amount in GROSS INCOME 140000 Less Itemized Deductions Real estate taxe... View the full answer