Question

Henrich is a single taxpayer. In 2019. his taxable income is $458.500. What is his income tax and net investment income tax liability in each of the following alternative scenarios? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates. Estates and Trusts for reference. (Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no answer blank. Enter zero if applicable.) a. All of his income is salary from his employer. Income tax Net investment income tax Total tax liability $ 0.00 b. His $458,500 of taxable income includes $2,000 of long-term capital gain that is taxed at preferential rates. Income tax Net investment income tax Total tax liability 0.00 c. His $458,500 of taxable income includes $56,000 of long-term capital gain that is taxed at preferential rates. Income tax Net investment income tax Total tax liability $ 0.00 d. Henrich has $199,250 of taxable income, which includes $51,700 of long-term capital gain that is taxed at preferential rates. Assume his modified AGI is $210,000. Income tax Net investment income tax Total tax liability $ 0.00

2019 Tax Rate Schedules

Individuals

Schedule X-Single

If taxable income is over:	But not over:	The tax is:
$           0	$    9,700	10% of taxable income
$    9,700	$ 39,475	$970 plus 12% of the excess over $9,700
$ 39,475	$ 84,200	$4,543 plus 22% of the excess over $39,475
$ 84,200	$160,725	$14,382.50 plus 24% of the excess over $84,200
$160,725	$204,100	$32,748.50 plus 32% of the excess over $160,725
$204,100	$510,300	$46,628.50 plus 35% of the excess over $204,100
$510,300	—	$153,798.50 plus 37% of the excess over $510,300

Schedule Y-1-Married Filing Jointly or Qualifying Widow(er)

If taxable income is over:	But not over:	The tax is:
$           0	$ 19,400	10% of taxable income
$ 19,400	$ 78,950	$1,940 plus 12% of the excess over $19,400
$ 78,950	$168,400	$9,086 plus 22% of the excess over $78,950
$168,400	$321,450	$28,765 plus 24% of the excess over $168,400
$321,450	$408,200	$65,497 plus 32% of the excess over $321,450
$408,200	$612,350	$93,257 plus 35% of the excess over $408,200
$612,350	—	$164,709.50 plus 37% of the excess over $612,350

Schedule Z-Head of Household

If taxable income is over:	But not over:	The tax is:
$           0	$ 13,850	10% of taxable income
$ 13,850	$ 52,850	$1,385 plus 12% of the excess over $13,850
$ 52,850	$ 84,200	$6,065 plus 22% of the excess over $52,850
$ 84,200	$160,700	$12,962 plus 24% of the excess over $84,200
$160,700	$204,100	$31,322 plus 32% of the excess over $160,700
$204,100	$510,300	$45,210 plus 35% of the excess over $204,100
$510,300	—	$152,380 plus 37% of the excess over $510,300

Schedule Y-2-Married Filing Separately

If taxable income is over:	But not over:	The tax is:
$           0	$    9,700	10% of taxable income
$    9,700	$ 39,475	$970 plus 12% of the excess over $9,700
$ 39,475	$ 84,200	$4,543 plus 22% of the excess over $39,475
$ 84,200	$160,725	$14,382.50 plus 24% of the excess over $84,200
$160,725	$204,100	$32,748.50 plus 32% of the excess over $160,725
$204,100	$306,175	$46,628.50 plus 35% of the excess over $204,100
$306,175	—	$82,354.75 plus 37% of the excess over $306,175

Tax Rates for Net Capital Gains and Qualified Dividends

Rate*	Taxable Income
	Married Filing Jointly	Married Filing Separately	Single	Head of Household	Trusts and Estates
0%	$0 - $78,750	$0 - $39,375	$0 - $39,375	$0 - $52,750	$0 - $2,650
15%	$78,751 - $488,850	$39,376 - $244,425	$39,376 - $434,550	$52,751 - $461,700	$2,651 - $12,950
20%	$488,851+	$244,426+	$434,551+	$461,701+	$12,951+

*This rate applies to the net capital gains and qualified dividends that fall within the range of taxable income specified in the table (net capital gains and qualified dividends are included in taxable income last for this purpose).

Answer 1

Ans:

A) All of his income is salary from employer:

Particulars	Amount($)
Taxable income	458,500
preferentially taxed income	0
Income Taxed at ordinary rates	458,500
Tax on income taxed at ordinary rates (46,628.50+35%{458,500-204,100}	135,668.50
Tax on preferentially taxed income	0
Income tax liability	135,668.50
Net investment income tax	0
Total income liability	135,668.50

B). His $458,500 of taxable income includes $2000 of long term capital gain that is taxed at preferential rates.

Particulars	Amount($)
Taxable income	458,500
preferentially taxed income	2,000
Income Taxed at ordinary rates	456,500
Tax on income taxed at ordinary rates (46,628.50+35%{456,500-204,100}	134,968.50
Tax on preferentially taxed income {2000*20%}	400
Income tax liability	135,368.50
Net investment income tax{taxable income exceeds $200k ; (2000*3.8%)	76
Total income liability	135,444.50

C). His $458,500 of taxable income includes $56,000 of long term capital gain that is taxed at preferential rates

Particulars	Amount($)
Taxable income	458,500
preferentially taxed income	56,0000
Income Taxed at ordinary rates	402,500
Tax on income taxed at ordinary rates (46,628.50+35%{402,500-204,100}	116,068.50
Tax on preferentially taxed income {434,550-402,500}*15%+{56,000-39,550)*20	8097.15
Income tax liability	124,165.65
Net investment income tax{taxable income exceeds $200k ; (56000*3.8%)	2,218
Total income liability	126,293.65

D). Henrich has $199,500 of taxable income , which includes $51,700 of long term capital gain that is taxed at preferential rates . assume his modified AGI is 210,000

Particulars	Amount($)
Taxable income	199,500
preferentially taxed income	51,700
Income Taxed at ordinary rates	147,800
Tax on income taxed at ordinary rates (14,382.50+24%{147,800-84,200)	29,646.50
Tax on preferentially taxed income {51,700*15%)	7,755
Income tax liability	37,401.50
Net investment income tax{taxable income exceeds $200k ; (10000*3.8%)	380
Total income liability	37,781.50