Question

Required Information [The following information applies to the questions displayed below.] Part 1 of 4 1.64 points Henrich is a single taxpayer. In 2018, his taxable income is $452,000. 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, Estates and Trusts for reference. (Do not round Intermediate calculations. Round your answer to 2 decimal places. Leave no answer blank. Enter zero if applicable.) eBook a. All of his Income is salary from his employer. Hint $ 452.000.00 Income tax Net investment income tax Total tax liability Print $ 452,000.00 References

Answer 1

calculation of Henrich tax liability is different scenarios

a) in this scenario all income is coming from employer as salary and there is no capital gain so no net investment tax

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	452000
Income before exemption and deduction	452000
less personal exemption	-0	all personsal exemption are disallowed from year 2018
less Standard  deduction	-12000	standard deduction allowed $ 12000 for single tax filler
Taxable income	440000	(452000-12000)
Taxes on Taxable income
Tax liability on base bracket	45689.50	taken from the table
Tax liability on excess over base@35%	84000	($440000-$200000 )*35%
Total federal income tax liability	129689.5	45689.50+84000=129689.5
Net investment Income tax Liability	0

B) in this case 452000 income includes 2000 long term gain i.e is calculated at preferential rates

Long term gain are gain which arises on assets or common stock held for more than year

Long term gain on  $ 2000 in case of Mr henrich will be @ 20% as his taxable income is greater than $425800

As long term Gain is arrising from estate and trust so as per federal tax rules it can be taxed in either in hands of henrich or estate which have lower tax on capital gain

as estate total income is $ 2000 ,so tax liability on its long term capital gain is 0%

so its better the long capital gain should be taxed in hand of estate and trust

calculation of federal income tax and Net Investment tax Liability

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	450000
Income before exemption and deduction	450000
less personal exemption	-0
less standard  deduction	-12000	standard deduction allowed $ 12000 for single tax filler
Taxable income before Lt gain And Dividends	438000	450000-12000
Taxes on Taxable income before LT Gain and dividends :
Tax liability on base bracket	45689.50
Tax liability on excess over base@35%	83300	$(438000-200000)*35%
Tax on Taxable income before LT Gain and dividends	128990	45689.50+83300=128989.5
Taxes on LT Gain and dividends :
Lt gain	2000
dividends	0
	2000
Tax on LT Gain and dividends :@0%	0	as long term gain is received from estate and trust and it is taxable in hands of estate and trust it will be exempt in hands of henrich
total federal tax liability	128990	=128990+0
net investment tax liability	0	as net investment should be 200000 or AGI should be more than 210000

c) In this case 452000 taxable income includes 43000 of long term gain

Gross salary = 452000- 43000

= 409000

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	409000	452000-43000
Income before exemption and deduction	409000
less personal exemption	-0
less standard  deduction	-12000	standard deduction allowed $ 12000 for single tax filler
Taxable income before Lt gain And Dividends	397000	409000-12000
Taxes on Taxable income before LT Gain and dividends :
Tax liability on base bracket	45689.50
Tax liability on excess over base@35%	68950	$(397000-200000)*35%
Tax on Taxable income before LT Gain and dividends	114640	45689.50+68950=114639.5
Taxes on LT Gain and dividends :
Lt gain	43000
dividends	0
	43000
Tax on LT Gain and dividends :@20 %	8600	as long term gain is received from estate and trust and it is taxable in hands henrich as tax liability in hands of estate for long term gain is more than henrich
total federal tax liability	123240	=114640+8600
net investment tax liability	0	as net investment should be 200000 or AGI should be more than 210000

d) 196000 which includes 50400 long ter gain

Calculation of federal Tax liability

Particulars	Amount($)
Gross salary	145600	196000-50400
adjusted Gross income	210000
Income before exemption and deduction	210000
less personal exemption	-0
less standard  deduction	-12000	standard deduction allowed $ 12000 for single tax filler
Taxable income before Lt gain And Dividends	198000	210000-12000
Taxes on Taxable income before LT Gain and dividends :
Tax liability on base bracket	32089.50
Tax liability on excess over base@32%	12960	$(198000-157500)*32%
Tax on Taxable income before LT Gain and dividends	45050	32089.50+12960=45049.5
Taxes on LT Gain and dividends :
Lt gain	50400
dividends	0
	50400
Tax on LT Gain and dividends :@15 %	7560	as long term gain is received from estate and trust and it is taxable in hands henrich as tax liability in hands of estate for long term gain is more than henrich
total federal tax liability	52610	45050+7560
net investment tax liability	380	as net investment should be 200000 or AGI should be more than 210000 so he is liable to pay 3.8 % tax AGI EXCESS INVESTMENT =210000-200000=10000 CAPITAL GAIN =50400 THE LOWER VALUE $10000 IS TAXABLE @3.8%