Dr. Johnson, age 52, was divorced in 2008. Children: Charles Johnson, age 14, is in the custody of Dr. Johnson’s ex- wife. Dr. Johnson is employed as a staff doctor at St. George Hospital; he is an active participant in the hospital pension plan. Dr. Johnson assembled the following information for calculation of his tax liability. Salary: $250,000 Interest income from taxable money market fund: $2,600 Qualified dividend income: $6,500 Municipal bond interest income: $14,000 Short-term capital gain income: $4,000 IRA contribution: $6,500 Alimony payment: $24,000 State and local income taxes: $10,500 Real estate taxes: $4,800 Sales tax on motor vehicle purchase: $2,500 General sales tax: $400 Home mortgage interest: $17,600 Credit card and automobile loan interest: $10,400 Unreimbursed employee business expenses: $1,790 1. What is Dr. Johnson’s adjusted gross income? 2. What is Dr. Johnson’s taxable income? 3. What is Dr. Johnson’s total tax due? 4. Describe the fundamental methods that Dr. Johnson has used to manage his tax liability effectively.
