Question

Monte Lion and Ella Funt are a married couple with three children. Wages totaled $141,600 with itemized deductions of $33,400. Interest income was 2,000.

The couple sold stock for $32,000 which had been purchased three years earlier for $26,000. They also sold stock for $8100 which had been puchased nine months earlier for 6,000 for the year the couple has paid 19,500 in federal taces they are also eligible for 3000 tax credit. How large of a refund will they receive

a)

6750

b) 6542.50

c) 5170.00

d) 5900

Answer 1

Answwer: a) 6750 (calculation is given below)

Calculation of gross total income of Monte Lion and Ella:

Wages Income = $141600

Saving Interest = $2000

Profit on Stock sold = $8100

Gross Total Income = $151700

Less: Deductions = $33400

Net Income = $118300

Calculation of Tax Liability on net Income:

$0 to $19400 tax is nil

$19400 to $78950 tax rate is 12%

$78951 to $ 168400 tax rate is 22%

Net Tax Liability = ($78950-$19400)* 12% + ($118300-$78950)*22% = $15750

Federal Tax Paid = $19500

Excess Tax Paid = $19500-$15750 = $3750

Tax Credit Available = $3000

So, Total refund Due = $3750+$3000 = $6750