Stephanie and Matt Are Married with No Children

question 95

Essay

Stephanie and Matt are married with no children. During 2018, they have total gross income of $140,000. Their allowable deductions for adjusted gross income total $6,000 and they have $16,000 of allowable itemized deductions. Compute Stephanie and Matt's 2018 taxable income and 2018 income tax liability.
a.Assume that in addition to the above information, Stephanie sold some land that she had held as an investment at a gain of $5,000. What is the effect of the gain on their taxable income and income tax liability? You do not need to recalculate, just explain the general effect of the sale of the land.
b.Assume the same facts as in part (a) and that Matt also sold some stock he purchased several years ago at a $12,000 loss. What is the effect of the gain on the land and the loss on the stock on their taxable income? Explain.

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Definitions:

Assets

Assets are resources owned or controlled by a business or individual that have economic value and can provide future benefits, including cash, property, and equipment.

Horizontal Analysis

A method of financial analysis in which figures in financial statements over different periods are compared line by line to identify trends.

Statement of Cash Flows

A financial report that details the inflows and outflows of cash within an organization over a specific period.

Fees Earned

Fees earned is an accounting term that refers to revenue generated from providing services to clients or customers during a specific time period.