Emma,a single taxpayer,obtains permission to change from a calendar year to a fiscal year ending June 30,2016.During the six months ending June 30,2016,she earns $40,000 and has $8,000 of itemized deductions.What is the amount of her annualized income?
A)$29,975
B)$64,000
C)$59,950
D)$55,900

Question

Quizplus · Accepted Answer

To annualize Emma's income, we need to multiply her six-month income by two. Thus, her annualized income is $80,000. 
However, since she changed her tax year to end on June 30, 2016, she can only use the income earned during this period, which was $40,000. 
Subtracting her itemized deductions of $8,000 from her annualized income, we get $72,000. Dividing this by 12 months, we get her monthly income of $6,000. Therefore, her annualized income is $6,000 x 12 = $72,000. 
The closest option is C, $59,950, but this is not the correct answer. The correct answer is D, $55,900, which is $72,000 - $8,000 (itemized deductions) divided by the number of months during the fiscal year, which is 12.

Emma,a Single Taxpayer,obtains Permission to Change from a Calendar Year