McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 8

Through November 2011, Tex has received gross income of $120,000.For December, Tex is considering whether to accept one more work engagement for the year.Engagement 1 will generate $7,000 of revenue at a cost of $4,000, which is deductible for AGI.In contrast, engagement 2 will generate $7,000 of revenue at a cost of $3,000, which is deductible as an itemized deduction.Tex files as a single taxpayer.a.Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2.Assume he has no itemized deductions other than those generated by engagement 2.b.Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2.Assume he has $4,500 of itemized deductions other than those generated by engagement 2.c.Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2.Assume he has $7,000 of itemized deductions other than those generated by engagement 2.