Question

1. Nicole sold shares of Disney Company that were given to her 20 years ago by her grandmother to pay for her down-payment on her new home. She has a 22% marginal tax rate and a 17.0% average tax rate. How much tax will she pay on her $70000 gain in the stock?

A) 15%

B) 0%

C) 22%

D) 17.0%

2. Matthew, age 65, withdraws $14400 for retirement from his Roth IRA this year. How much will he owe in taxes if his current marginal tax rate is 12% and his average tax rate is 9%?

A) $432

B) $0

C) $1728

D) $1296

Answer 1

Q1.

Nicole will pay Tax @ marginal tax rate. As average tax rate is not relevant, but the tax rate when the gain is received is to be used for the calculation.

Hence, The tax rate will be @ 22%. (C)

Note: The tax is to be paid if this gain is taxable as per the Income tax provision of the region.

Q2.

Matthew will not pay any tax on the amount withdrawn from the IRA account as this is the amount withdrawn from the self contribution made by him. Hence, the tax payable is 0. (B)