D is corrent. The requirement is to determine the 2013 income tax for Poole, an unmarried taxpayer in the 15% bracket with $30,000 of adjusted gross income. To determine Poole’s taxable income, his adjusted gross income must be reduced by the greater of his itemized deductions or a standard deduction, and a personal exemption. Since Poole’s medical expenses of $9,150 are deductible to the extent in excess of 10% of his AGI of $30,000, his itemized deductions of $6,150 exceed his available standard deduction of $6,100. Poole’s tax computation is as follows:| Adjusted gross income | | $30,000 | | Less: | | | | Itemized deductions | $6,150 | | | Personal exemption | 3,900 | 10,050 | | Taxable income | | $19,950 | | Tax rate | | × 15% | | Income tax | | $ 2,993
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A is incorrect because Poole’s AGI is reduced by $6,150 of itemized deductions and his personal exemption. B is incorrect because Poole’s AGI is reduced by $6,150 of itemized deductions and his personal exemption.C is incorrect Poole's AGI is reduced by $6,150 of itemized deductions and his personal exemption. |
