Choice "d" is correct. Adjusted gross income is gross income plus or minus
certain other amounts. Half of the $8,000 self-employment tax is an adjustment
for AGI, as is the $6,000 self-employed health insurance, the $5,000 alimony,
and the $2,000 contribution to a traditional IRA. All of these amounts (total of
$17,000) are subtracted from the $57,000 gross income to arrive at AGI. The AGI
is thus $40,000. Choice "c" is incorrect. The $55,000 is the $57,000 gross income subtracting
only the $2,000 IRA contribution. Choice "a" is incorrect. The $50,000 is the $57,000 subtracting only the
$5,000 alimony and the $2,000 IRA contribution. Choice "b" is incorrect. The $46,000 is the $57,000 subtracting everything
but the $6,000 self-employed health insurance. |
