Question

Required information [The following information applies to the questions displayed below.] Henrich is a single taxpayer. In 2020, his taxable income is $450,000. 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 for reference. (Do not round intermediate calculations. Leave no answer blank. Enter zero if applicable.) a. All of his income is salary from his employer. Answer is not complete. Amount 132.295 Income tax Net investment income tax Total tax liability 132,295

Answer 1

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Solution: Answers are highlighted in yellow: As per Tax year 2020: a) Particulars 1) Taxable income 2) Preferentially taxed income 3) Income taxed at ordinary rates 4) Tax on income taxed at ordinary rates 5) Tax on preferentially taxed income 6) Income tax Liability 7) Net Investment income tax 8) Total Income Liability Amount Explanation 450000 0 450000 132295 (47367.50)+(450000-207350) *35% 0 132295 (4+5) 0 Taxable Income exceeds $200K 132295 (6+7) b) Particulars 1) Taxable income 2) Preferentially taxed income 3) Income taxed at ordinary rates 4) Tax on income taxed at ordinary rates 5) Tax on preferentially taxed income 6) Income tax Liability 7) Net Investment income tax 8) Total Income Liability Amount Explanation 450000 2000 448000 131595 (47367.50)+(448000-207350) *35% 400|2000*20% 131995 (4+5) 76.00 Taxable income exceeds $200K, (2000*3.8%) 132071 (6+7)

c) Particulars 1) Taxable income 2) Preferentially taxed income 3) Income taxed at ordinary rates 4) Tax on income taxed at ordinary rates 5) Tax on preferentially taxed income 6) Income tax 7) Net Investment income tax 8) Total Income & Net Investment tax Amount Explanation 450000 55000 395000 113045.00 (47367.50)+(395000-207350) *35% 8677.50 (441450-395000) *15%; (55000-46450) * 20% 121722.50 (4+5) 2090.00 Taxable income exceeds $200K, (55000*3.8%) 123812.50 (6+7) d) Particulars 1) Taxable income 2) Preferentially taxed income 3) Income taxed at ordinary rates 4) Tax on income taxed at ordinary rates 5) Tax on preferentially taxed income 6) Income tax 7) Net Investment income tax 8) Total Income & Net Investment tax Amount Explanation 195000 50000 145000 28879.50 (14605.50) +(145000-85525) * 24% 7500 (50000) *15% 36379.50 (4+5) 380.00 Taxable income exceeds $200K, lesser (10000*3.8%) 36759.50 (6+7)