Question

taxation individuals 2020 edition

QUESTION 5 Chuck, a single taxpayer, earns $80,000 in taxable income and 510,000 in interest from an investment in City of Heflin bonds. If Chuck came an additional 10.000 of table income what is his marginal tax rate on this income? QUESTION 6 Chuck, a single taxpayer, earns $80,000 in taxable income and $10,000 in interest from an investment in City of Hellin bonds. If Chuck claims an additional 40.000 of deduction what is his marginal tax rate on this income? QUESTION 7 Jorge and Anita, married taxpayers, carn $155.000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly, how much federal tax will they owe?

Answer 1

Answer 5

Tax due in 2019 - 2020 = $4,543 + 22% of ($80,000 - $39,475) = $13,458.5

Tax due with $40,000 additional taxable income = $14,382.5 + 24% of ($120,000 - $84,200) = $22,974.5

Marginal tax rate = ($22,974.5 - $13,458.5)/ ($120,000 - $80,000) = 23.79%

Answer 6

Tax due in 2019 - 2020 = $4,543 + 22% of ($80,000 - $39,475) = $13,458.5

Tax due with $40,000 additional deduction = $4,543 + 22% of ($40,000 - $39,475) = $4,658.5

Marginal tax rate = ($13,458.5 - $4,658.5)/($80,000 - $40,000) = 22%

Answer 7

Federal tax due = $9,086 + 22% of ($155,000 - $78,950) = $25,817

Answer 12

To solve for pre tax return, the following formula can be used:

After-tax return = Pretax return * (1- Marginal tax rate)
5% = Pretax return * (1 - 28%)

Pre-tax return = 5%/72% = 6.94%

Surething Inc. must offer interest rate of 6.94% to make Huge indifferent between investing in the two bonds.