Chapter 3 Personal Taxes Mary Jarvis is a single individual who is working on fi

Question

Chapter 3 Personal Taxes

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 $94,000 in salary.

She received $18,500 of dividend income.

She received $8,000 of interest income on Home Depot bonds.

She received $25,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $5,600.

She received $12,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $6,800.

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.

1. What is Mary's federal tax liability? Round your answer to the nearest cent. Do not round intermediate calculations.

2. What is her marginal tax rate? Round your answer to 1 decimal place.

3.What is her average tax rate? Round your answer to 2 decimal places.

Table 3.5 2015 Individual Tax Rates Single Individuals You Pay This Amount on the Base ofthe Bracket Plus This Percentage Avage Tax If Your Taxable Income Is Up to S9,225 $9,225-$37,450 S37,450-$90,750 90,750-$189,750 S189,750-S411,500 S411,500-S$413,200 Over $413,200 on the Excess over the Rate at Rate Top of Bracket Base MAA 10.0% 15.0 25.0 28.0 33.0 35.0 39.6 10.0% 13.8 20.4 24.3 29.0 29.0 39.6 0 922.50 5,156.25 18,481.25 46,075.25 119,401.25 119,996.25 Married Couples Filing Joint Returns You Pay This Amount on the Base of the Bracket Plus This Percentage Avage Tax on the Excess over the If Your Taxable Income Is Up to $18,450 S18,450-S74,900 S74,900-S151,200 S151,200-$230,450 S230,450-$411,500 S411,500-$464,850 Over $464,850 Rate at Base (Marginal Rate 10.0% 15.0 25.0 28.0 33.0 35.0 39.6 10.0% 13.8 19.4 22.4 27.1 28.0 39.6 0 1,845.00 10,312.50 29,387.50 51,577.50 111,324.00 129,996.50

Explanation / Answer

Salary              94,000 Dividend income              18,500 Interest Income                 8,000 Long term capital gain - Disney              19,400 =25000-5600 Short term capital gain - Google                 5,200 =12000-6800 Gross Income $        145,100 Less: Deduction for AGI 0 AGI $        145,100 Less: Deduction from AGI Standard deduction or Itemized Deduction whichever is higher(7500 > 6300) -7500 Less: personal exemption -4000 Taxable Income $        133,600 Ordinary taxable income $          95,700 $ 19,867.25 =18481.25+(95700-90750)*28% Long term capital gain and dividend )taxed at 15% if tax bracket is 28% 37900 $    5,685.00 =37900*15% Total tax $ 25,552.25 1 Mary federal tax liability $    25,552.25 2 Marginal tax rate 28.0% 3 Average Tax Rate 19.13% (25552.25/133600) Please ask in comment if any answer mismatch, Thanks.

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