Erimma is single with no dependents and had the following for 2014: Wages from U

Question

Erimma is single with no dependents and had the following for 2014:

Wages from Union Job: $75,000

Loss from sale of stock held 4 years: $ -2,000   

Qualifying Dividends: $3,000

Exemption Deduction: $3,950

Itemized Deductions: $14,900

Part 1: How much is Erimma's taxable income?

a. $57,150 b. $60,150 c. $58,150 d.$76,000

Part 2: How much is Erimma's ordinary income for calculating her capital gains tax for 2014?

a. $56,150 b. $76,000 c. 54,150 d. $57,150

Part 3: Assuming her ordinary income is $36,900 and her taxable income is $56,900, how much is her federal income tax for 2014?

a. $8,535 b. $10,154 c. $5,154 d. $8,154

Explanation / Answer

1 Taxable Income of Erimma for the year 2014 is calcualted as under: Wages from Union Job $                      75,000 Loss on sale of stock $                      (2,000) Qualified Dividend $                        3,000 Aggregate Income $                      76,000 Less: Exemption deduction $                      (3,950) Itemized deduction $                    (14,900) Taxable Income $                      57,150 Therefore Erimma taxable income is $57,150. The correct answer is option a. 2 Ordinary Income for calculating capital gain tax is calculated as under: Wages from Union Job $                      75,000 Loss on sale of stock $                      (2,000) Qualified Dividend $                        3,000 Aggregate Income $                      76,000 Less: Exemption deduction $                      (3,950) Itemized deduction $                    (14,900) Taxable Income $                      57,150 3 If ordinary income is $36,900 and taxable income is $56,900 then the federal income tax for the year 2014 is as under: If taxable income is more than $36,900 then federal income tax would be as under: Taxable Income $56,900 Less: Personal exemption $                      (6,200) Net taxable income $50,700 Tax on $50,700 Upto $9,075 @ 10% ($9,075*10%) $907.50 From $9,075 to $36,900 @ 15% ($36,900-$9,075)*15% $    4,173.75 From $36,900 to $50,700 @ 25% ($50,700-$36,900)*25% $    3,450.00 Total federal Income tax $8,531.25 Therefore the point a $8,535 is correct answer.

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