Description

Option #1: Computing Taxable Income

Prepare a 3-4-page Word document answering the following case:

Rank the following three single taxpayers in order of magnitude of taxable income (from lowest to highest) and explain your results. (Note: Use standard deduction amounts provide under the Tax Cut Job Acts (TCJA) enacted in November 2017).

Alice: Gross Income = $80,000

Deductions for AGI = $15,000

Itemized deductions = 0

Brian: Gross Income = $80,000

Deductions for AGI = $5,000

Itemized deductions = $12,000

Craig: Gross Income = $80,000

Deductions for AGI = $0

Itemized deductions = $15,000

Consider the differences between the standard deductions vs. itemized deductions given the filing status. Additionally:

• Compare and contrast deductions for AGI and deductions from AGI (itemized deductions).

• Discuss whether the tax treatment for each taxpayer is in line with the Adam Smith’s taxation cannons.