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 $70,000 in salary.
• She received $12,000 of dividend income.
• She received $8,300 of interest income on Home Depot bonds.
• She received $22,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $6,500.
• She received $11,500 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $5,700.
• 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.

Table 3.5 2015 Individual Tax Rates Single Individuals If Your Taxable Income Is Up to $9,225 $9,225-$37,450 $37,450-$90,750 $90,750-$189,750 $189,750-$411,500 S411,500-$$413,200 Over $413,200 You Pay This Amount on the Base of the Bracket S 0 922.50 5,156.25 18,481.25 46,075.25 119,401.25 119,996.25 Plus This Percentage on the Excess over the Base Marginal Rate) 10.0% 15.0 25.0 28.0 33.0 35.0 39.6 Average Tax Rate at Top of Bracket 10.0% 13.8 20.4 24.3 29.0 29.0 39.6 Married Couples Filing Joint Returns If Your Taxable Income Is Up to $18,450 $18,450-$74,900 $74.900-5151,200 $151,200-$230,450 $230,450-$411,500 $411,500-$464,850 Over S464,850 You Pay This Amount on the Base of the Bracket S 0 1,845.00 10,312.50 29,387.50 51,577.50 111,324.00 129,996.50 Plus This Percentage on the Excess over the Base ( Marginal Rate) 10.0% 15.0 25.0 28.0 33.0 35.0 39.6 Average Tax Rate at Top of Bracket 10.0% 13.8 19.4 22.4 27.1 28.0 39.6

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.

Answer 1

Computation of total Income of Mary Jarvisi Particulars Amount Amount 70,000 22000 (6.50o) Income from salary Income from Capitel Gain : - Longtern Capital Grain: on sale Proceeds from Disney - stock Less: Cost of Pearchase in short term Capital Gaina Sole Proceeds from Google stock Less: Cost of Purchase Income from Divideod Income Income from Interest on Home Depot Bonds 1s, soo 111,500 (520) 5,800 Teooo 8,300 111,600 8 atat Less: De Gross Annual Income Itemised Deductions امكة Total Income 1104, loo

@ computation of Mary's federal Income tat liability (Mary's status is Single Individual) 1 Tax on total income axcept long form capital gain! $88.000 ($104,100 - $13.500) Income. Bracket Tax Rate Income & - Tax due on total income except long term Capital Gain (6) - Fron&o to $9,625 10% From $9,886 to $37, 450 15% from $37451 tot 80 750 2t qees 28,225 54300 982.50 4233.75 $3,385.00 From $37, 450 to $88,600 254. si, 150 12,787.50 88,000 17943.75 Gain : rate applicable (1) Tax on long Term Capital if total income Tax 80 to $39,375 1 $39,376 to $434,550 $434,55) on more 20% In Mary's told income is $ 104100 . Tot on Coogterm capital Gain = $is soo x 15% =42325

is $20,268.75 Total relend Income tant licbility : $17,943.75 + $2,325) @ Marginal tax rate of Mary's Highest tax bracket that applies to Mary's the Margind tax rate it, 25% is © Avonge tax rate of Mary Total Total Tax clue x100 Income $20, 268.75 $104, 100 19,47%