Mary Jarvis is a single individual who is working on filing her tax return for t
ID: 2338213 • Letter: M
Question
Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information: She received $108,000 in salary She received $13,500 of dividend income. She received $7,000 of interest income on Home Depot bonds. She received $22,500 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $5,800. . . She received $11,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $5,500 Mary receives one exemption ($4,000), and she has allowable itemized deductions of $7,500. These amounts will be deducted from her gross income to determine her taxable income. Assume that her tax rates are based on Table 3.5. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below a. What is Mary's federal tax liability? Round your answer to the nearest cent. Do not round intermediate calculations. b. What is her marginal tax rate? Round your answer to 1 decimal place. c. What is her average tax rate? Round your answer to 2 decimal places.Explanation / Answer
Solution:-
(a).Mary's federal tax liability:-
= 22,500 - 5,800
= $16,700
= 11,000 - 5,500
= $5,500
=108,000 + 13,500 + 7,000 + 16,700 + 5,500
= $150,700
=150,700- 4,000 - 7,500
= $139,200
= 13,500 * 15%
= $2,025
= 16,700 * 15%
= $2,505
= 2,400 + 2,535 + 952.5 + 3,500.8 + 9,635.7 + 10,943.7
= $29,967.92
2. Marginal tax rate:-
= $952.5 + 3,500.8 + 9,635.7 + 10,943.7
= $25,032.7
3. average tax rate:-
= 108,000 + 25032
= $133,032
= $29,967.92 /133,032
= 0.2256 * 100
= 22.52%
Salary income $108,000 Dividend income $13,500 Interest income $7,000 Long term capital gain= 22,500 - 5,800
= $16,700
Short term capital gain= 11,000 - 5,500
= $5,500
Gross income=108,000 + 13,500 + 7,000 + 16,700 + 5,500
= $150,700
Exemption $4,000 Itemized deductions $7,500 Taxable income=150,700- 4,000 - 7,500
= $139,200
Tax on dividend income @15%= 13,500 * 15%
= $2,025
Tax on long term capital gain @15%= 16,700 * 15%
= $2,505
Tax on reamining income $108,000 Tax on first ($9525 * 10%) $952.5 Tax on next(29,174 * 12%) $3,500.8 Tax on next (43,799 * 22%) $9,635.7 Tax on next (45,599 * 24%) $10,943.7 Total federal tax liability= 2,400 + 2,535 + 952.5 + 3,500.8 + 9,635.7 + 10,943.7
= $29,967.92