Problem:
Through November, Tex has received gross income of $67,500. For December, Tex is considering whether to accept one more work engagement for the year. Engagement 1 will generate $7,030 of revenue at a cost of $3,850, which is deductible for AGI. In contrast, engagement 2 will generate $7,030 of revenue at a cost of $3,180, which is deductible as an itemized deduction. Tex files as a single taxpayer.
Required:
Question 1: Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $5,820 of itemized deductions other than those generated by engagement 2.
Question 2: Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $8,080 of itemized deductions other than those generated by engagement 2.
Note: Please show how to work it out.