Question

3. Marc, a single taxpayer, earns $260,000 in taxable income and $8,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, what is his current marginal tax rate? (Tax rate schedules)

MULTIPLE CHOICE

a. 15.00%

b. 33.00%

c. 28.00%

d. 25.00%

e. none of the choices are correct

4. Geronimo files his tax return as a head of household for year 2017. If his taxable income is $187,000, what is his average tax rate? (Tax rate schedules)

MULTIPLE CHOICE

a. 22.82%

b. 24.04%

c. 24.88%

d. 30.80%

e. none of the choices are correct

5. Manny, a single taxpayer, earns $82,500 per year in taxable income and an additional $8,750 per year in city of Boston bonds.

What is Manny's current marginal tax rate for year 2017? (Tax rate schedules)

MULTIPLE CHOICE

a. 18.01%

b. 28.25%

c. 15.11%

d. 22.42%

e. 25.00%

6. Leonardo, who is married but files separately, earns $90,000 of taxable income. He also has $8,750 in city of Tulsa bonds. His wife, Theresa, earns $37,500 of taxable income.

If Leonardo earned an additional $27,500 of taxable income this year, what would be the marginal tax rate on the extra income for year 2017? (Tax rate schedules)

MULTIPLE CHOICE

a. 27.90%

b. 17.65%

c. 25.15%

d. 28.15%

e. none of the choices are correct

7. If Susie earns $225,000 in taxable income, how much tax will she pay as a single taxpayer for year 2017? (Tax rate schedules)

MULTIPLE CHOICE

a. $47,061.20

b. $57,330.40

c. $57,649.25

d. $74,445.80

e. none of the choices are correct

9. Curtis invests $650,000 in a city of Athens bond that pays 8.75% interest. Alternatively, Curtis could have invested the $650,000 in a bond recently issued by Initech, Inc. that pays 10.00% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%.

How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?

MULTIPLE CHOICE

a. $46,800

b. $18,200

c. $15,925

d. $40,950

e. none of the choices are correct

10. ackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds that pay 8.2% interest. Jackson is a single taxpayer who earns $80,000 annually. Assume that the city of Mitchell bonds and the Sundial, Inc. bonds have similar risk.

What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for year 2017? (Tax rate schedules)

MULTIPLE CHOICE

a. 6.15%

b. 8.20%

c. 6.65%

d. 5.85%

e. none of the choices are correct.

Answer 1

3. b. 33%. As per the Tax rate schedule for 2017, single taxpayer having taxable income between $191,650 to $416,700 will be taxed at marginal tax rate of 33%.

4. a. 22.82%. As per the Tax rate schedule for 2017, head of household taxable income between $131,200 to $212,500 will be taxed at marginal tax rate of 28%

Excess over $131,200 x 28%= $55800 x 28% = $15624

Add: Tax on Income upto $131200 = $27052.50

Total $42676.50

Average tax rate = Total Tax/total taxable income

= $42,676.50/$187,000

= 22.82%

5. e. 25%. As per the Tax rate schedule for 2017, single taxpayer having taxable income between $37,950 to $91,900 will be taxed at marginal tax rate of 25%. Manny's taxable income is $82,500 thus she comes in this bracket. Income from municipal bonds are tax-exempted.

6. e. none of the choices are correct. If Leonardo earns an additional income of $27,500, his total taxable income for the year 2017 will be $117,500, this income will fall in 33% tax bracket.

7. c. $57,649.25

Tax on income upto $191650 = $46,643.75

Tax on excess income over $191650 i.e.$33350 ($225000-$191650) x 33% = $11,005.50

Total tax = $46,643.75 + $11,005.50 = $57649.25

9. b. $18,200

$650,000 x 10% = $65000 interest

$65000 x 28% = $18200

10. a. 6.15%

Jackson's marginal tax rate is 25%. so his after tax rate of Sundial Inc. will be 6.15%. Thus the City of Mitchell must pay interest rate of 6.15% to make Jackson indifferent between two investment.