Question

Allison had the following transactions during 2019:

Salary		$90,000
Bank loan obtained to pay for car purchase		30,000
Interest income on bonds—
Issued by City of Nashville	$4,000
Issued by Procter & Gamble Corporation	5,000	9,000
Child support received		6,000
Capital gain from stock investment, held for 4 months		3,500
Alimony received (divorce finalized in 2011)		5,000
Inheritance received from Grandpa George		20,000
Charitable contributions paid to church		(5,000)

What is Allison’s AGI for 2019?  Show and label all calculations.  For all items you exclude from the calculation, explain why. (8 points)

Answer 1

Answer-Allison's AGI For 2019:-

Particulars	Amount
Salary	$90,000
Add:Interest Income on Bonds by Procter & Gamble Corporation	$5,000
Add:Capital gain from stock investment, held for 4 months	$3,500
Add: Alimony received	$5,000
Gross Income	$103,500
Less: Deduction for AGI	$0
Allison's AGI for 2019	$103,500

Why not other items included:-

1- Interest Income -Issued by City of Nashville These bonds are tax-free.

2-Child support received It is not taxable as per IRS

3-Inheritance received from Grandpa George It is tax-free

4-Charitable contributions paid to church It is an itemized deduction not required while calculating AGI.