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:

Video Excel Online Structured Activity: 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 $96,000 in salary. • She received $18,500 of dividend income. • She received $7,700 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 $6,400. • She received $10,500 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $6,000. • 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. Open spreadsheet 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. 28 % c. What is her average tax rate? Round your answer to 2 decimal places. Check My Work Reset Problem

Answer 1

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	96000
Interest	7700
Short term capital gain	4500	SALE PRICE - COST =($10500-$6000)= $4500
Income before exemption and deduction	108200
less personal exemption	-4000
less itemized deduction	-7500
Taxable income before Lt gain And Dividends	96700
Taxes on Taxable income before LT Gain and dividends :
Tax liability on base bracket	18481.25
Tax liability on excess over base@28%	1666	$96700-$90750=$5950
Taxe on Taxable income before LT Gain and dividends	20147.25
Taxes on LT Gain and dividends :
Lt gain	15600	sale -cost =(22000-6400)=15600
dividends	18500
	34100
Tax on LT Gain and dividends :@15%	5115
total federal tax liability	25262.25	=20147.25+5115

( A) federal tax liability =$25262.25

( B) Marginal tax rate = 28%

(c) average tax rate = total tax / total income

= 25262.25/(96700+34100)*100

=19.31%