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 $20,000 of dividend income.
• She received $6,300 of interest income on Home Depot bonds.
• She received $24,500 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $6,100.
• She received $14,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,800.
• Mary receives one exemption ($4,000), and she has allowable itemized deductions of $7,500. These amounts will be deducted from her gross income to determine her taxable income.

Personal taxes
Salary	$88,000.00		Tax Table for Single Individuals:
Dividend Income	$20,000.00		Taxable Income	Amount Paid on Base	Percentage on Excess over Base
Interest Income	$6,300.00		$0.00	$0.00	10.00%
LT Stock Sale	$24,500.00		$9,225.00	$922.50	15.00%
LT Stock Cost	$6,100.00		$37,450.00	$5,156.25	25.00%
ST Stock Sale	$14,000.00		$90,750.00	$18,481.25	28.00%
ST Stock Cost	$7,800.00		$189,750.00	$46,075.25	33.00%
Personal Exemption	$4,000.00		$411,500.00	$119,401.25	35.00%
Itemized Deductions	$7,500.00		$413,200.00	$119,996.25	39.60%
Apllicable Tax Rate on Dividends & LT Capital Gains	15.00%

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

   $

2. What is her marginal tax rate? Round your answer to 1 decimal place.

   %

3. What is her average tax rate? Round your answer to 2 decimal places.

   %

Answer 1

Assumption - We will assume tax year 2019 as nothing is mentioned in the question
Ans a)
Particluars	Amt
Salary	$         88,000
Dividend Income	$         20,000
Interest Income	$            6,300
Short Term Capital Gain	$            6,200
Exemption	$          -4,000
Deduction	$          -7,500
Taxable Income	$       109,000
Tax rate	24%
Tax Liability	$         20,334
Tax rate of Single
Tax Brackets	Tax Rate
$0 - $9,700	10%
$9,701 - $39,475	12%
$39,476 - $84,200	22%
$84,201 - $160,725	24%
So, tax liability of $109,000 is
($9,700* 10%) + ($39,475 - $9,701) *12% + ($84,200 - $39,476) *22% + ($109,000 - $84,201)*24%	$   20,334
Ans b)
Marginal Tax Rates increases as income increases.
It is already mentioned in the above table in column 1 i.e. Tax Bracket
Answer 3
Average tax rate	Tax Liability
	Taxable Income
	$         20,334
	$       109,000
	18.66%