Sarah and Jason are married and live in a community property state.Sarah is a nurse and earns $40,000 per year; Jason is an engineer and earns $75,000 per year.They have a joint bank account that earned $500 in interest and Jason recently invested in some stocks that paid a $2,000 dividend.If Sarah and Jason file separate returns, how much income would Sarah report?
A)$40,000
B)$41,000
C)$57,750
D)$58,750

Question

Quizplus · Accepted Answer

In a community property state, income earned by either spouse during marriage is considered equally owned by both spouses. Therefore, Sarah and Jason would each report half of their combined income and half of the investment income. Their combined income is $40,000 (Sarah) + $75,000 (Jason) = $115,000, and the investment income is $500 (interest) + $2,000 (dividends) = $2,500. Half of the combined income is $115,000 / 2 = $57,500, and half of the investment income is $2,500 / 2 = $1,250. Therefore, Sarah would report $57,500 + $1,250 = $58,750.

Sarah and Jason Are Married and Live in a Community