Question

(11% 523,000). e. None of these 11. On a particular Saturday. Tom h ated to paint a room in his work that day. If Tom works, he must hire a pain hiring the painter: a. Tom must eam more than $158 if he is in the 24% marginal b. Tom must earn at least 158 if he is in the 32% marginal tax e. Tom must eam at least 5140 if he is in the 24% marginal tax brac d. Tom must earn at least $120 if he is in the 12% marginal tax bru e. None of these. int a room in his house, but his employer gave him the opportunity to hire a painter for $120. For Tom to have a positive cash flow from working and in the 24% marginal tax bracket. 58 if he is in the 32% marginal tax bracket

Answer 1

Solution Tom has to pay $120 to the Painter to paint the room, which is a personal expense of Tom, and Tom can not claim tax benefit for the expense. To have a positive cash flow from working and hiring a painter, Tom must earn that much amount which after deducting the tax, is higher than $120. Now, we shall calculate the minimum earning Tom must earn under the given various marginal tax brackets. 24% marginal tax bracket Minimum earning $120/ (1-0.24) $158 If Tom is in the 24 % marginal tax bracket, he must earn more than $158 32% marginal tax bracket Minimum earning $120/ (1-0.32) $176 If Tom is in the 32 % marginal tax bracket, he must earn more than $176. 12% marginal tax bracket Minimum earning = $120/(1-0.12) $136 If Tom is in the 12 % marginal tax bracket, he must earn more than $136. Hence, analysing the various scenario above, the correct option is a. Tom must earn more than $158 if he is in the 24% marginal tax bracket.