Question

INDTAP Search this course . ty Personal taxes 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 th • She received $106,000 in salary. • She received $19,500 of dividend Income. • She received $8,400 of interest income on Home Depot bonds. • She received $25,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $6,600 • She received $14,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,300. • 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 determ income. Assume that her tax rates are based on Table 3.5. The data has been collected in the Microsoft Excel Online Nebelow. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet 3. What is Mary's federal tax liability? Round your answer to the nearest cent. Do not to b. What is her marginal tax rate? Round your answer to 1 decimal place. What is her average tax rate? Round your answer to 2 decimal places.

Answer 1

a.

106000 19500 8400 27900 18400 Computation of Taxable income Salary Income Add: Dividend Income Interest Income Long term Capital Gain on Disney Stock Add: (25000-6600) Short term capital Gain on google stock (14000-7300) Less: Itemized deduction Taxable income Less: Exemption Adjusted Taxable income 7400 25800 -7500 152200 -4000 148200 Computation of Tax liability (2019) For (148200-18400)= $129,800 Tax bracket $0 to $9,700 10% $9,701 to $39,475 12% $39,476 to $84,200 22% $84,201 to $129,800 24% 970 3573 9839.5 10944 25326.5 2760 Tax on Long term Capital Gain (18400*15%) (Since her income is between $39,376 to $434,550 so long term capital gain tax rate is 15%) Federal Tax Liability 2019 28086.5

b. Marginal Tax Rate = 24% (marginal tax rate is the rate you would pay on a fictional additional dollar of income.)

c. Average Tax Rate = 28086.5 / 148200 *100 = 18.95%