Question

Mike and Julie Bedard are a working couple. They will file a joint income tax return. This year they have the following taxable income: 1. 5121,000 from salary and wages (ordinary income). 2. S3,000 in interest income 3. $1,000 in dividend income 4. 55,000 in profit from sale of a stock they purchased 2 years ago 5. 51,000 in profit from a stock they purchased this year and sold this year Use the federal income tax rates given in Table 1.2, EE, to work this prablem. a. How much will Mike and Julie pay in federal income taxes on 2 above? b. How much will Mike and Julile pay in federal Income taxes on 3 above? (Note: Remember that dividend income is taxed differently than ordinary income.) c. How much will Mike and Julle pay in federal income taxes on 4 above? d. How much will Mike and Julie pay in federal income taxes on 5 above? The amount Mike and Julie vwill pay in federal income taxes on 2, their interest income, is (Round to the nearest dollar) b. The amount Mike and Julie will pay in federal income taxes on 3, thair dividend income, is (Round to the nearest dollar)(Note Remember that dividend income is taxed differently than ordinany income) C. The amount Mike and Julie will pay in federal income taxes on 4, the profit from the sale of stock that they purchased 2 years ago, is (Round to the nearest dollar) d. The amount Mike and Julie will pay in federal income taxes on 5, the pro on the sale of stock they purchased and sold this year, is (Round to the nearest dollar ) ABLE 12: Tax Rates and Income Brackets for Joint Returns (2015) Tax Rates 10% 15% 25% 28% 33% 35% 39 696 Taxable Income Joint Retums 50 to 518,150 $18,151 to $73,800 $73,801 to $148,850 S148,851 to $226,850 $226.851 to $405,100 $405,101 to $457,600 Over $457,600 Enter your answer in each of the answer boxes.

Answer 1

Ans-The ordinary tax rate for Mike and Julie Bedard is 25% as their income is in the range $73,801-$148,850.

a- Interest income will be charged at their ordinary tax rates:

Tax= 25% of $3,000

=$750

b- Dividend income is taxed at 15%

Tax= 15% of $1,000

=$150

c-Long term capital gains are taxed at 15%

Tax=15% of 5,000

= $750

d- Short term capital gains are taxed at ordinary tax rates.

Tax= 25% of $1,000

=$250