Question

The Gabriel family tells you the following regarding their financial situation for 2015: Their salary is $75,000. They paid real estate taxes of $4,000 and interest on their mortgage of $3,000. They earned interest from $1,800 from a savings account and $1,500 from a Cortland Water bond. Lastly they made $2,000 on the sale of a property they owned for 5 months. They also made $5,000 on the sale of AES stock they purchased 4 years ago. The couple has three children. Exemptions are $3,800/person.

a. WHAT IS THEIR TAXABLE INCOME? SHOW YOUR WORK STEP BY STEP.

b. Use the tax table below to determine their total tax liability. SHOW YOUR WORK.

Taxable Income Tax Rate

Up to $25,000 10%

$25,000 -$40,000 15%

$40,000 - $55,000 20%

$55,000-$70,000 25%

over $70,000 35%

c. What is the family's marginal rate?

d. What is the family's average rate? Show your calculation.

Answer 1

ANSWER TO A
COMPUTATION OF TAXABLE INCOME
PARTICULARS	AMOUNT	AMOUNT
Salary	75,000.00
Interest from Savings Account	1,800.00
Interest from Cortland Water Bond	1,500.00
Short term Capital Gains	2,000.00
Long term Capital Gains	5,000.00	85,300.00
Real Estate Taxes	4,000.00
Interest on Mortgage	3,000.00	7,000.00
Gross Total Income		78,300.00
Less: Exemptions		19,000.00
(3800 per person x 5 person)
TAXABLE INCOME		59,300.00
ANSWER TO B
COMPUTATION OF INCOME TAX
PARTICULARS	AMOUNT	AMOUNT
Upto 25000		2,500.00
25000 - 40000		3,750.00
40000-55000		3,000.00
55000-59300		1,075.00
INCOME TAX PAYABLE		10,325.00
ANSWER TO C
MARGINAL RATE OF TAX	=	17.41%
ANSWER TO D
AVERAGE RATE OF TAX	=	2,065.00
		PER PERSON