Question

Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information:

-She received $101,000 in salary.

-She received $18,000 of dividend income.

-She received $6,100 of interest income on Home Depot bonds.

-She received $22,500 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $9,000.

-She received $10,500 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $5,500.

-Mary only has allowable itemized deductions of $5,500, so she will take the standard deduction of $12,000 will be deducted from her gross income to determine her taxable income.

Assume that her tax rates are based on Table 3.5.

Table 3.5 2018 Individual Tax Rates Single Individuals If Your Taxable Income is Up to $9,525 $9,525 - $38,700 $38,700 - $82,500 $82,500 - $157,500 $157,500 - $200,000 $200,000 - $500,000 Over $500,000 You Pay This Amount Plus This Percentage on Average Tax on the Base of the the Excess over the Base Rate at Top of Bracket (Marginal Rate) Bracket $0.00 10.0% 10.0% 952.50 12.0% 11.5% 4,453.50 22.0% 17.1% 14,089.50 24.0% 20.4% 32,089.50 32.0% 22.8% 45,689.50 35.0% 30.1% 150,689.50 37.0% 37.0% Married couples Filing Joint Returns If Your Taxable Income Is Up to $19,050 $19,050 - $77,400 $77,400 - $165,000 $165,000 - $315,000 $315,000 - $400,000 $400,000 - $600,000 Over $600,000 You Pay This Amount Plus This Percentage on Average Tax on the Base of the the Excess over the Base Rate at Top of Bracket (Marginal Rate) Bracket $0.00 10.0% 10.0% 1,905.00 12.0% 11.5% 8,907.00 22.0% 17.1% 28,179.00 24.0% 20.4% 64,179.00 32.0% 22.8% 91,379.00 35.0% 26.9% 161,379.00 37.0% 37.0%

1. What is Mary's federal tax liability? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

2. What is her marginal tax rate? Do not round intermediate calculations. Round your answer to one decimal place.

     %

3. What is her average tax rate? Do not round intermediate calculations. Round your answer to two decimal places.

     %

Answer 1

Computation of total taxable income of Mary Jarvis
S.no	Particulars	Amount $	Amount $
A	Salary Income	101000
B	Dividend Income	18000
C	Interest income on Home depot bonds	6100
D	Capital Gains from sale of disney Stock
	Sale value less Cost = (22,500-9,000)	13500
E	Capital Gains from sale of google Stock
	Sale value less Cost = (10,500-5,500)	5000
F	Gross total income(A+B+C+D+E)		143600
G	Less: standard Deduction		-12000
H	Net taxable income( F-G)		131600

Since mary is single individual and her taxable income is $131600 she falls under 4Th bracket where she has to pay $14,089.50 on base of bracket($82,500) and 24% on excess over base which amounts to $11,784 ( 131600- base of 82500)* 24%

A) Mary's federal Tax laibility would be $25873.5.

B) Marginal tax rate would be 24%

C) Average Tax rate would be 19.66 % ( $25873.5/ 131600= 19.66%)