Tax Research Project
Tax Research Project
Dale and Jane Carl
Taxable income, as defined in §63(b) is “adjusted gross income, minus the standard deduction, and the deduction for personal exemptions.” We already know that Dale and Jane have a $157,000 adjusted gross income or “AGI”, defined in §62 (a) as “gross income minus the following deductions” (all of the deductions that are listed are found on the first page of form 1040).
Because the Carl’s AGI is already known, the next step in the process of determining their tax liability is to deduct the standard deduction. Standard deduction is defined in §63(c)(1) as “the sum of the basic standard deduction and the additional standard deduction.” The basic standard deduction is an amount that is supplied by the IRS every year, and for 2012, the amount allowed for deduction by couples who filed their return as married-joint is $11,900. An additional standard deduction is allowed for “the aged and blind” according to §63(c)(3), but the Carls do not qualify for any additional standard deductions. This means that if the Carls do choose to use the standard deduction this year, they would be allowed an $11,900 deduction.
As stated earlier, to figure out taxable income we must also deduct any personal or dependency exemptions that the Carls may have. According to §151(b), “an exemption of the exemption amount for the taxpayer, and an additional exemption of the exemption amount for the spouse of the taxpayer … shall be allowed as deductions in computing taxable income.” The exemption amount for 2012 is $3800. Additionally, as stated by §151(c), “an exemption of the exemption amount for each individual who is a dependent of the taxpayer” is allowed as a deduction. A dependent is defined in §152(a)(1) and §152(a)(2) as “a qualifying child, or a qualifying relative.” In this case, Dale and Jane’s son David is considered a qualifying child. This is because he fits all of the requirements set forth in
Dale and Jane Carl
Taxable income, as defined in §63(b) is “adjusted gross income, minus the standard deduction, and the deduction for personal exemptions.” We already know that Dale and Jane have a $157,000 adjusted gross income or “AGI”, defined in §62 (a) as “gross income minus the following deductions” (all of the deductions that are listed are found on the first page of form 1040).
Because the Carl’s AGI is already known, the next step in the process of determining their tax liability is to deduct the standard deduction. Standard deduction is defined in §63(c)(1) as “the sum of the basic standard deduction and the additional standard deduction.” The basic standard deduction is an amount that is supplied by the IRS every year, and for 2012, the amount allowed for deduction by couples who filed their return as married-joint is $11,900. An additional standard deduction is allowed for “the aged and blind” according to §63(c)(3), but the Carls do not qualify for any additional standard deductions. This means that if the Carls do choose to use the standard deduction this year, they would be allowed an $11,900 deduction.
As stated earlier, to figure out taxable income we must also deduct any personal or dependency exemptions that the Carls may have. According to §151(b), “an exemption of the exemption amount for the taxpayer, and an additional exemption of the exemption amount for the spouse of the taxpayer … shall be allowed as deductions in computing taxable income.” The exemption amount for 2012 is $3800. Additionally, as stated by §151(c), “an exemption of the exemption amount for each individual who is a dependent of the taxpayer” is allowed as a deduction. A dependent is defined in §152(a)(1) and §152(a)(2) as “a qualifying child, or a qualifying relative.” In this case, Dale and Jane’s son David is considered a qualifying child. This is because he fits all of the requirements set forth in