Question

# Mary Jarvis is a single individual who is working on filing her tax return for the...

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 \$13,500 of dividend income.

She received \$7,500 of interest income on Home Depot bonds.

She received \$23,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of \$6,300.

She received \$11,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of \$7,600.

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.

Tax Table for Single Individuals:
Taxable Income   Amount Paid on Base   Percentage on Excess over Base
\$0.00   \$0.00   10.00%
\$9,225.00   \$922.50   15.00%
\$37,450.00   \$5,156.25   25.00%
\$90,750.00   \$18,481.25   28.00%
\$189,750.00   \$46,075.25   33.00%
\$411,500.00   \$119,401.25   35.00%
\$413,200.00   \$119,996.25   39.60%

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

\$

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

%

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

%

Mary's federal tax liability is \$31,039.25

Salary \$106,000

Dividend Income \$13,500

Interest income on Home Depot Bonds \$7,500

Capital Gain from sale of Disney stock \$16,700 (23000-6300)

Gain from sale of Google stock \$3,400 (11000-7600)

Mary's total Income \$147,100

Less: Itemized deduction \$7,500

Taxable income \$139,600

Less: Exemption \$4,000

Net Taxable Income \$135,600

Tax rate for Mary is 28%

Amount on base \$18,481.25

Amount on excess over base (135600-90750) x 28% \$12,558

Federal tax liability \$31,039.25

Marginal Tax rate

There are 7 marginal tax rate bracket for individual. Mary fall in the following brackets:

0 - \$9225 x 10% = \$922.50

9225 - 37,450 x 15% = \$4233.75

37450 - 90750 x 25%=\$13,325

90750 - 135600 x 28%=\$12558

Total tax payable =\$31,039.25

Average tax rate = Total tax liability / Total Taxable income

= \$31,039.25/\$135,600

= 22.89%