To determine the taxable incomes for Henry and Ruth, we'll go through the scenario step-by-step for the given year.
### Taxpayer Information:
1. Henry:
- Occupation: Construction worker
- Taxable Income: [tex]$90,000.00
2. Ruth:
- Hobby: Painting
- Income from selling a painting: $[/tex]3,000.00
- Expenses related to painting:
- Supplies: [tex]$800.00
- Small Tools: $[/tex]420.00
### Step-by-Step Solution
1. Calculate Ruth's Hobby Income:
Ruth made [tex]$3,000 from selling her painting. To calculate the taxable income, we need to subtract the allowable expenses from this income.
\[
\text{Allowable Expenses} = \text{Supplies} + \text{Tools} = \$[/tex]800.00 + \[tex]$420.00 = \$[/tex]1,220.00
\]
2. Ruth's Taxable Income Calculation:
Subtract the allowable expenses from Ruth's hobby income:
[tex]\[
\text{Ruth's Taxable Income} = \$3,000.00 - \$1,220.00 = \$1,780.00
\][/tex]
Ruth's painting activity is considered a hobby. Hence, expenses are limited to the hobby income itself.
If after subtracting expenses, if the result is negative, it would be limited to [tex]$0. But here we have a positive amount left.
3. Combined Income Calculation:
Now, we combine Henry's taxable income with Ruth's taxable income:
\[
\text{Combined Taxable Income} = \text{Henry's Income} + \text{Ruth's Taxable Income} = \$[/tex]90,000.00 + \[tex]$1,780.00 = \$[/tex]91,780.00
\]
### Final Results:
- Ruth's Taxable Income: \[tex]$1,780.00
- Combined Taxable Income: \$[/tex]91,780.00
These amounts represent the taxable incomes that need to be reported for the given tax year.
