Question

Sandy is a single and has the following situation for the year: Sandy's income of $80,000; dividend income of $20,000; interest income of $2,000; short-term capital gain of $8,000 and long-term capital gain of 14,000. She also paid $1,000 on interest charges on her credit card. Her other total exemptions and itemized deductions is 22,000; these amounts will be deducted from her gross income to determine her taxable income. If she is files as a single individual, what is Sandy's tax liability for the year, i.e. how much in taxes she will pay for the year? Use the individual tax rate provided below. Individual Tax Rates: Single Individual Taxable Income You Pay This Amount on the Base of the Bracket Plus This Percentage on the Excess over the Base (Marginal Rate) Average Tax Rate at the Top of Bracket Up to $8925 $0 10.0% 10.0% $8925-36350 $892.50 15.0 13.8 $36250-87850 $4991.25 25.0 20.4 $87850-183250 $17891.25 28.0 24.3 183250-398350 $44603.25 33.0 29.0 $398350-400000 $115586.25 35.0 29.0 Over $400000 $116163.75 39.6 39.6 A. $20,984.25 B. $22,268.25 C. $21,104.25 D. $20,033.25 E. None of the above

Answer 1

Sandy's tax liability Income = $80,000 Shoot term capital gain - 48000 Intemente income - $ 9000 Dividend income = $ 20,000 Long term Capital gain = $14000 AGI = 80,000 + 8000 + 2000 + 20000+ 14000 Ś $124000 Itemized deduction - $22000 Tarable income 124000 - 20000 : .= $102000 taxed at Dividend & long term Capital gains are the rate of 15% for most tax payers

Page No @ On long form Copptal gain @15%. = $15.00 on income other than above = 14891.25 + (102000 -87850)x 0.2033 = 14891125 + 2877 = 20468125 Total tax payable = 1500 + 20768.25 = $2826825 Option B is conscct answer