Bill and Tessa Have Two Children Whom They Support and Who

question 49

Essay

Bill and Tessa have two children whom they support and who live in their home.Timmy is 17 and has earned income of $5,000 for the year.Their other child,Tommy,is 15.Tessa's mother also lives with them and may be claimed as their dependent.She is 89 years old.Their adjusted gross income is $130,000.
Required: Compute Bill and Tessa's taxable income for 2017 if they file a joint return and they do not itemize deductions.

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.

Equivalent Annual Cost

A financial metric used to compare the cost-efficiency of different investments or projects with different lifespans, by calculating their annual costs.

Present Value

The present day value of an anticipated future amount of money or series of cash receipts, calculated with an established rate of return.

CCA Tax Shield

Refers to the reduction in taxable income for businesses through the deduction of depreciation on long-term assets.