Mary Watson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $45,000 as a sales assistant for Focused Business Analytics: $3,910 of her wages was withheld for federal income taxes. In addition, she had interest income of $142. Estimate her taxable income, tax liability, and tax refund or tax owed.

Mary Watson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $45,000 as a sales assistant for Focused Business Analytics: $3,910 of her wages was withheld for federal income taxes. In addition, she had interest income of $142. Estimate her taxable income, tax liability, and tax refund or tax owed.

2. Debra Ferguson received the items and amounts of income shown in the chart to the right during 2011. Help her calculate (a) her gross income and (b) that portion (dollar amount) of her income that is tax exempt.

Salary $33,500 Dividends 800 Gift from mother 500 Child support from ex-husband 3,600 Interest on savings account 250 Rent 900 Loan from bank 2,000 Interest on state government bonds 300

3. If Amy Phillips is single and in the 28 percent tax bracket, calculate the tax associated with each of the following transactions. (Use the IRS regulations for capital gains in effect in 2011.) Treat each of the following cases as independent of the others.
a. She sold stock for $1,200 that she purchased for $1,000 5 months earlier.

b. She sold bonds for $4,000 that she purchased for $3,000 3 years earlier.
c. She sold stock for $1,000 that she purchased for $1,500 15 months earlier.

4. Use Worksheets 3.1 and 3.2.
QiangGao graduated from col-
lege in 2011 and began work as
a systems analyst in July of that
year. He is preparing to file his
income tax return for 2011 and
has collected the financial infor-
mation shown in the table to
the right for that calendar year.
a. Prepare Qiang’s 2011 tax return, using a $5,700 standard deduction, a personal exemption

Tuition, scholarships, and grants
Scholarship, room, and board
Salary 30,250

185 3,000 2,600

of $3,650, and the tax rates given in Exhibit 3.3. Which tax form should Qiang use, and why? b. Prepare Qiang’s 2011 tax return using the data in part a along with the following information:

IRA contribution $5,000 Cash dividends received 150

Which tax form should he use in this case? Why?

g.Demonstrate the differences resulting from a $1,000 tax credit versus a $1,000 tax deduc- tion for a single taxpayer in the 25 percent tax bracket with $40,000 of pre-tax income. 


h.Steve and Beth Compton have been notified that they are being audited. What should they do to prepare for the audit?