What is the adjusted gross income for a single taxpayer with the following income: $200,000 in wages, $250,000 from the sale of a primary residence, $40,000 in alimony paid, $25,000 in life insurance proceeds, and $4,500 in a Traditional IRA contribution?

What is the adjusted gross income for a single taxpayer with the following income: $200,000 in wages, $250,000 from the sale of a primary residence, $40,000 in alimony paid, $25,000 in life insurance proceeds, and $4,500 in a Traditional IRA contribution?

• A. $405,500
• B. $195,500
• C. $250,000
• D. $185,000

Answer: (A)

To determine the adjusted gross income (AGI) for a single taxpayer, we start with the total income and then make the necessary adjustments according to IRS rules. In this scenario, the taxpayer has: - $200,000 in wages, - $250,000 from the sale of a primary residence. It is important to note that the $250,000 from the sale of a primary residence may not be fully taxable due to the exclusion allowed for the sale of a primary home. However, if the taxpayer meets the requirements, they can exclude up to $250,000 of gain (or $500,000 if filing jointly). In this case, since we're only looking for AGI, the entire sale amount is included for calculation purposes at this stage. Next, the taxpayer has: - $40,000 in alimony paid, which is deductible for the payer if the divorce or separation agreement was executed before 2019. This amount reduces the total income. - $25,000 in life insurance proceeds, which are not included in the gross income and don't affect the AGI. - $4,500 in a contribution to a Traditional IRA, which is also deductible, further reducing income. Calculating the AGI: 1. Start

To determine the adjusted gross income (AGI) for a single taxpayer, we start with the total income and then make the necessary adjustments according to IRS rules.

In this scenario, the taxpayer has:

• $200,000 in wages,

• $250,000 from the sale of a primary residence.

It is important to note that the $250,000 from the sale of a primary residence may not be fully taxable due to the exclusion allowed for the sale of a primary home. However, if the taxpayer meets the requirements, they can exclude up to $250,000 of gain (or $500,000 if filing jointly). In this case, since we're only looking for AGI, the entire sale amount is included for calculation purposes at this stage.

Next, the taxpayer has:

• $40,000 in alimony paid, which is deductible for the payer if the divorce or separation agreement was executed before 2019. This amount reduces the total income.

• $25,000 in life insurance proceeds, which are not included in the gross income and don't affect the AGI.

• $4,500 in a contribution to a Traditional IRA, which is also deductible, further reducing income.

Calculating the AGI:

1. Start