Questions: Find the gross income, the adjusted gross income, and the taxable income on the taxpayer's income tax return. Base the tax on the taxable income. He earned 17,500, received 121 in interest from savings account, and contributed 2900 to an IRA.

Find the gross income, the adjusted gross income, and the taxable income on the taxpayer's income tax return. Base the tax on the taxable income. He earned 17,500, received 121 in interest from savings account, and contributed 2900 to an IRA.

Transcript text: Find the gross income, the adjusted gross income, and the taxable income on the taxpayer's income tax return. Base the tax on the taxable income. He earned $17,500, received $121 in interest from savings account, and contributed $2900 to an IRA.

Solution

Solution Steps

To solve this problem, we need to follow these steps:

Calculate the gross income by summing up the earned income and the interest received.
Calculate the adjusted gross income by subtracting the IRA contribution from the gross income.
The taxable income is the same as the adjusted gross income in this simplified scenario.

Step 1: Calculate Gross Income

The gross income $ G $ is calculated by summing the earned income $ E $ and the interest income $ I $: \[ G = E + I = 17500 + 121 = 17621 \]

Step 2: Calculate Adjusted Gross Income

The adjusted gross income $ AG $ is found by subtracting the IRA contribution $ C $ from the gross income $ G $: \[ AG = G - C = 17621 - 2900 = 14721 \]

Step 3: Calculate Taxable Income

In this scenario, the taxable income $ T $ is the same as the adjusted gross income $ AG $: \[ T = AG = 14721 \]