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 $88,000 in salary. She received $11,000 of dividend income. She received $6,900 of interest income on Home Depot bonds. She received $23,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $6,000. She received $10,500 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $5,200. • Mary receives one exemption ($4,050), and she has allowable itemized deductions of $7,500. These amounts will be deducted from her gross income to determine her taxable income. Assume that her tax rates are based on Table 3.5. a. 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. $ b. What is her marginal tax rate? Do not round intermediate calculations. Round your answer to one decimal place. % c. What is her average tax rate? Do not round intermediate calculations. Round your answer to two decimal places. %

Answer 1

Solution:
	Taxable income of Mary Jarvis
	Salary	$88,000
	Dividend income	$11,000
	Interest Income	$6,900
	Gain from Disney stock ($23,000 - $6,000)	$17,000
	Gain from sale of Google stock ($10,500 - $5,200)	$5,300
	Less: exemptions and allowable deductions
	Exemptions	($4,050)
	Itemized deductions	($7,500)
	Total Taxable income	$116,650
a.	Federal tax liability
=	$18,481.25 + ($116,650 - $90,750) * 28%
=	$25,733.25
b.	Mary is single taxpayer covered under tax bracket
	$18,481.25 + ($90,750 - $189,750 )* 28%
	So marginal tax rate is 28%
c.	Average Tax rate
=	$25,733.25/$116,650 *100
=	22.06%
	Please upvote , if found the answer useful.
	For any clarification, Feel free to reach at comment Section